Understanding Inheritance Tax on Unused Pension Funds: A Guide

Ever wondered how inheritance tax applies to your unused pension funds? Or the death benefits you hope to pass on? These are questions many of us grapple with as we plan our estates. The government’s latest response to these issues offers some valuable insights. First, let’s talk about unused pension funds. Did you know that if you die before 75, your unused pension funds can be passed on tax-free? However, if you pass away after 75, the recipient will need to pay income tax. It’s a crucial detail to consider in your estate planning. Now, let’s switch gears to death benefits. These are typically paid out tax-free. But the taxman could still take a bite if they push your estate’s value over the £325,000 inheritance tax threshold. Lastly, a recent government proposal might change the game. It suggests treating unused pension funds and death benefits alike for tax purposes, potentially simplifying matters. Ultimately, the key takeaway is to stay informed and tweak your estate plans as laws evolve.

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