CERTAIN INHERITANCE TAX advantages apply as regards death benefits where an individual is a member of an exempt approved (registered from 6 April 2006) pension scheme. First although the scheme will be held on discretionary trusts no inheritance tax periodic or exit charges will arise because such funds are not regarded as relevant property (IHTA 1984 s 58(1)(d)). Second when death benefits are paid out of the scheme provided that these are distributed within two years of death there will be no inheritance tax (Occupational Pension Scheme Practice Notes para 4.5 and Personal Pension Schemes Guidance Notes para 10.38).
The problem is that once the funds have been released from the pension scheme they are no longer protected but are exposed to the full rigours of inheritance tax. So if as is likely to be the case ...
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