Pensions and probate valuation?

[Gilgongo]

I'm just looking at this, but it doesn't seem to give any guidance about how to treat a private pension in the assets of the deceased:

https://www.gov.uk/valuing-estate-of-someone-who-died

I think, but I'm not sure, that you should not include the value of a SIPP when valuing the estate for probate, but can anyone confirm?

[monabri]

I googled "Do I include the value of a sipp for probate"

It looks that way that the SIPP is not counted as part of the the estate. I've posted links to 3 independent sources.

https://www.wealthify.com/blog/what-hap ... when-i-die

"Is a SIPP subject to inheritance tax?

For inheritance tax purposes, no, your private pension doesn’t form part of your estate. However, if you have taken a lump sum from your pension and this is in your bank account, then it would be classed as your estate and would be taxed as such".


https://www.hl.co.uk/help/profile-setti ... en-you-die

"Any money or investments still in your SIPP when you die will normally pass to your beneficiaries.
These are the people you’ve chosen using your account settings online. "

https://www.ii.co.uk/ii-accounts/sipp/inheritance-tax
What happens to my SIPP when I die?
You are in control of what happens to your SIPP in the event of your death. You can decide who will inherit your SIPP - whether a family member, friend or a charity. You can also split your SIPP between various beneficiaries, in any proportion.

[Gilgongo]

Yes, those are similar to the links I found as well, but they don't seem to be completely clear to me on the specific issue of valuation for probate. And what's odd is that the HMRC calculator is silent on the matter. You'd think they'd say not to include the value of assets held in a private pension if that was the case, but they don't.

So maybe they expect you to include the value of any SIPP, but the beneficiaries get the assets in the SIPP tax free. Maybe some distinction between the total value of all the assets (plus gifts within 7 years) and the "qualifying" value of the estate that has deductible things like liabilities and private pensions? Just not in the calculator for some reason?

Still confused.

EDIT: Oh this seems clearer and implies you don't mention the value of the SIPP to HMRC:

https://www.onlinemoneyadvisor.co.uk/pe ... ipp-death/

"Does a SIPP form part of your estate for inheritance tax purposes?
No: under the broader pension rules SIPPs are exempt from inheritance tax (IHT) and do not form part of your taxable estate."

[mc2fool]

I think, but I'm not sure, that you should not include the value of a SIPP when valuing the estate for probate, but can anyone confirm?

That's correct. The point to understand is that, despite appearances, a SIPP does not belong to you. You don't own it, the trustees of the scheme do. So, it's not part of your estate and so doesn't get included in probate or come under inheritance tax.

You may (should) have filed an expression of wishes with your SIPP provider stating who you'd like to leave the SIPP to but an expression of wishes is all it is; it is not legally binding and it is totally up to the trustees who they give it to.

Now, there's no chance that they'll decide to give your SIPP to the trustees' golf club, that'd just invite legal action, but if your expression of wishes is to leave it to the local donkey sanctuary and you have dependant children there's a good chance the trustees will ignore your wish and give it to the kids instead. It's this very fact that you have no (legal) control over the disposition of your SIPP that makes it outside of your estate.

[Gilgongo]

Ah, as I suspected - thanks!

Might send feedback to HMRC that they could mention something along those lines in their documentation, particularly as it says here that you need to identify assets including ".. things like bank accounts, savings and pensions, as well as property, household goods and personal items."

[Neutrino]

Might send feedback to HMRC that they could mention something along those lines in their documentation, particularly as it says here that you need to identify assets including ".. things like bank accounts, savings and pensions, as well as property, household goods and personal items."

Good luck with that!

Foreign ‘pensions’ are unlikely to fall out of the estate for inheritance tax purposes. For example, a US 401(k) plan does not have a ‘letter of wishes’ but a Beneficiary Designation for Death Benefits.

In HMRC’s defence, further down it does say:

ask if you should include any private pension when you value the estate

[Lootman]

Foreign ‘pensions’ are unlikely to fall out of the estate for inheritance tax purposes. For example, a US 401(k) plan does not have a ‘letter of wishes’ but a Beneficiary Designation for Death Benefits.

Actually there is a "Transfer on Death" designation option on all US financial accounts, and not just on pensions.

It is optional of course and without it your account will be subject to probate in the ordinary way. But if a T-on-D designation is made then that account will bypass probate, and will override any provision of your will. Effectively it creates a trust under the covers.

It is a very useful feature of financial accounts, and it is a shame that nothing similar is available in the UK, to my knowledge anyway.