Where you become aware of a distribution of death benefits (
IHTM17030) from a pension scheme to a
discretionary trust you should refer the matter in the first
instance to TG at IHT Edinburgh who will advise what, if any,
claims to IHT arise.
Where pension death benefits are held on trust under the
rules of a pension scheme etc. this is a settlement for Inheritance
Tax purposes within the definition at IHTA84/S43 (2). Where the
scheme is ‘approved’ (
IHTM17020) or a ‘sponsored
superannuation scheme’ (
IHTM17122) then IHTA84/S151 provides
certain reliefs (
IHTM17121) from IHT. Amongst the
reliefs is the provision that where the death benefits are payable
at the discretion of the trustees they are not ‘relevant
property’ for the purposes of the discretionary trust code
(IHTA84/S58 (1)(d)).
Strictly speaking on the member’s death IHTA84/S151
would cease to apply and any distribution of the death benefits at
the trustee’s discretion would be subject to an exit charge
in the normal way. IHT however accept that the Scheme
Administrators may require up to 2 years to weigh up all the
factors material to the exercise of their discretionary powers and
that the death benefits therefore may properly be regarded as
remaining held for IHTA84/S151 purposes pending the exercise (
IHTM17124) of such powers for up to two
years. This treatment is concessionary.
