1. DEATH IN SERVICE Arrangements for university and medical staff to potentially save Inheritance Tax

2. With the NHS or University Superannuation Schemes a multiple of your superannuable salary will be paid out should you die whilst you are employed. (NHS 2 times; USS 3 times)

3. This sum will normally be paid to your spouse. With the NHS or University Superannuation Schemes a multiple of your superannuable salary will be paid out should you die whilst you are employed. (NHS 2 times; USS 3 times)

4. It would then form part of your spouse’s estate bringing it into “the net” for Inheritance Tax and Long Term Care “means testing”. With the NHS or University Superannuation Schemes a multiple of your superannuable salary will be paid out should you die whilst you are employed. (NHS 2 times; USS 3 times) This sum will normally be paid to your spouse.

5. With the NHS or University Superannuation Schemes a multiple of your superannuable salary will be paid out should you die whilst you are employed. (NHS 2 times; USS 3 times) This sum will normally be paid to your spouse. It would then form part of your spouse’s estate bringing it into “the net” for Inheritance Tax and Long Term Care “means testing”.

6. THE SOLUTION?

7. Establish a trust during your lifetime which is designed specifically to receive the capital sum.

8. On your death, the capital sum is paid into this trust which means that: Establish a trust during your lifetime which is designed specifically to receive the capital sum.

9. It is not added to your spouse’s estate for inheritance Tax purposes Establish a trust during your lifetime which is designed specifically to receive the capital sum. On your death, the capital sum is paid into this trust which means that:

10. It will not be assessed as capital belonging to your spouse for the purposes of a long term care means test Establish a trust during your lifetime which is designed specifically to receive the capital sum. On your death, the capital sum is paid into this trust which means that: It is not added to your spouse’s estate for inheritance Tax purposes

11. Your spouse still has access to and control of income and /or capital from the trust. Establish a trust during your lifetime which is designed specifically to receive the capital sum. On your death, the capital sum is paid into this trust which means that: It is not added to your spouse’s estate for inheritance Tax purposes It will not be assessed as capital belonging to your spouse for the purposes of a long term care means test

12. EXAMPLE IN PRACTICE

13. Inheritance Tax is not normally charged on gifts between spouses. This tax is charged when a person dies and transfers chargeable assets to persons other than the spouse in excess of a ‘Nil Rate Band’ currently £312,000 each. So: £1,000,000 - £624,000 = £376,000 * 40% = £150,400 House/personal £ 650,000 Investments £ 150,000 Death in Service benefit £ 200,000 Total Joint Estate £1M Inheritance Tax £150,400

14. House/personal£ 650,000 Investments£ 150,000 Death in Service benefit: trust£0 Total Joint Estate£800,000 Inheritance Tax£70,400 The trust removes the Death in Service lump sum from your estate; this means that: £200,000 is removed at a tax rate of 40% giving a potential tax saving of £80,000. Resulting in the potential Inheritance Tax being reduced to £70,400.

15. Death in Service What will this cost me? …Nothing but a little time! 1. Time to complete the necessary documentation (University Superannuation Scheme and the National Health Service Pension Scheme in Scotland and England have different procedures.) 2. Attach £10 note to give the trust ‘substance’ and 3. Copy the documents to your pension scheme with a specific covering letter.

16. FOR FURTHER INFORMATION CONTACT: Andrew Walker Senior Partner The St. James’s Place Partnership 20 Carlton Place Aberdeen AB15 4BQ Telephone: 01 224 647 102 Mobile: 07 900 284 729 Email: andrew.walker@sjpp.co.uk