IHTM17083 - Claim on general power to dispose of death benefits: nomination

Where the deceased had an unfettered power to sign a nomination (either for the first time or having revoked an existing nomination) which bound the trustees of the pension scheme to make the payment of the death benefits ( IHTM17030) to the person named by the deceased then a claim to Inheritance Tax arises on the death benefits as an asset of the deceased’s estate ( IHTM04029) under IHTA84/S5 (2). An unfettered power to nominate in this context means that the deceased could nominate to anyone they wished including their own personal representatives ( IHTM05012). Care must be taken not to confuse a binding nomination with a non-binding letter of wishes ( IHTM17084) as taxpayers often refer to the latter as a ‘nomination’.

The parties should include the lump sum death benefits as an asset of the deceased’s estate at box 15 in the form IHT409 ( IHTM10035) and provide details of

• the name of the pension scheme or title of the personal pension policy
• whether the scheme/policy is approved ( IHTM17020) for income tax purposes
• the amount of the lump sum payment
• the name of the person who received the lump sum payment and their relationship to the deceased.

If the power is exercised irrevocably more than 2 years before the deceased’s death (assuming the deceased to have been in good health at the time) then no Inheritance Tax claim normally arises.

If you think you may have a claim on a nominated death benefit which has not been returned in the IHT400 ( IHTM10021) you should refer the file to TG in IHT Edinburgh to confirm the claim.