What are my pension rights and Inheritance Tax liabilities on the death of my spouse/partner

It is often not until a loved one dies that the full extent of their assets and liabilities becomes known. Not all couples have full and frank discussions about money and possessions, nor do they always understand exactly what they stand to inherit – good and bad – from their partner. 

It’s an issue for all couples, whether married, unmarried, or in a civil partnership. And because good planning can reap significant rewards later on, it really is worth getting to grips with the way in which your finances and possessions could be best organised for your partner’s future.

Pensions can be one of the more complex aspects of this. While a property, or money in the bank, is a relatively straightforward asset for a partner to inherit (you know what you’re getting), a pension pot is usually more nebulous. It’s a conventional asset to inherit, nevertheless.

The first step is to establish the pension provision that your partner had in place. If you are over State Pension age (we will be able to check this for you) you may be able to claim payments from your deceased partner’s State Pension. If your partner had a private pension, including a works pension, you would need to check the terms of that scheme to see if you are entitled to payments. You may also be entitled to a War Widow’s or Widower Pension, if your partner died in service.

As you’d expect, there may be tax implications of inheriting a partner’s pension pot. This largely depends on the type of pension that is in place, the type of payment that may be made out of it, and the age of your partner when they died. It is worth noting that Inheritance Tax is not usually payable where the pension provider has chosen to pay you a lump sum. Contrast that with the situation in which a partner took money out of their pension before their death but didn’t spend it; Inheritance Tax may be payable on that amount.

The rules can be complex, and we would advise anyone who is looking to get their finances into shape to take specific advice on the best way of ensuring that their partner will inherit the maximum benefit from all assets – pension included. And if you are the partner of someone who has died, talk to us. Our team will make sure that you get your full entitlement.

Contact our Private Client Team today on 01264 353411, email:  probate@bsandi.co.uk or complete our no obligation, online enquiry form and we will be happy to discuss your particular circumstances.