The Lemon Fool

One of my children is disabled and we are in the process of setting up a 'disabled persons trust' for her via our solicitor and I am reviewing the 'Expression of Wish' form for my SIPPS.

I had planned to name her 'disabled persons trust' as one of my nominees to receive funds after my death however I read somewhere that distributions from a SIPP/PP after the death of the SIPP/PP account holder are subject to a tax charge (40%) as the distribution is to a trust and not a person.

I approached my solicitor who wouldn't comment. My IFA doesn't know. My SIPP holding company will not comment and a local accountant ( billed as a trust specialist) 'thinks' the tax charge is not made in the case of a 'disabled persons trust'.

Can anyone give me a steer on this please?

Sobraon wrote:One of my children is disabled and we are in the process of setting up a 'disabled persons trust' for her via our solicitor and I am reviewing the 'Expression of Wish' form for my SIPPS.

I had planned to name her 'disabled persons trust' as one of my nominees to receive funds after my death however I read somewhere that distributions from a SIPP/PP after the death of the SIPP/PP account holder are subject to a tax charge (40%) as the distribution is to a trust and not a person.

I approached my solicitor who wouldn't comment. My IFA doesn't know. My SIPP holding company will not comment and a local accountant ( billed as a trust specialist) 'thinks' the tax charge is not made in the case of a 'disabled persons trust'.

Can anyone give me a steer on this please?

I think there are a few people on this board who may be able to help. Failing that, you may find Mencap helpful:

https://www.mencap.org.uk/advice-and-support/wills-and-trusts-service

RC

Thanks RC, my daughter does not have a learning disability and I had seen the Mencap service but I think its very much designed for people with a learning disability so is not appropriate for her. Thanks for your thoughts.

Sobraon wrote:Thanks RC, my daughter does not have a learning disability and I had seen the Mencap service but I think its very much designed for people with a learning disability so is not appropriate for her. Thanks for your thoughts.

I think she is either a "vulnerable person" for tax purposes or she isn't - there is no analysis of why you are vulnerable. So the analysis of what happens to a SIPP "inheritor" will not vary. The "what to do" may vary, but the tax consequences will not.

I am not sure if this is what you are thinking of - the special lump sum death benefits charge which the manual says is 45% not 40%, But in case it is and in case you can understand HMRC speak I attach a link to a page from the Pensions Tax Manual

https://www.gov.uk/hmrc-internal-manual ... /ptm073010

I confess I had thought you could only nominate individuals or a charity but somewhere in the manual it says you can nominate anyone including trustees as long as the scheme rules allow it.

The tax treatment seems weird to me - why should you pay income tax on a lump sum death benefit?

Anyway I hope that helps.

Many thanks Seasider, not sure I understand the implications of the HMRC page as I will need to think carefully about it.

Surprised this seems to have bypassed my solicitor (a trust specialist), my accountant ( advertises themselves as a trust specialists) and the pension company (who accepts trusts on the beneficiary form).

So thanks again everyone for your thoughts.