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The Importance of Wealth Planning

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This article was submitted by Slator & Gordon

The decisions people make about their financial future, are among the most important they will ever make.  Having a wealth management plan can make a big difference to financial worth and well-being – in addition to providing peace of mind. 

The case of The Commissioners for Her Majesty’s Revenue and Customs v Richard William James Parry and others (2017) UK UT 4 (TCC) dealt with the issue of alleged transfers of value for inheritance tax purposes from one pension scheme to another.

The facts in this case are of key importance to the decision that the tribunal reached. Mrs Staveley (“the Deceased”) transferred funds from one registered pension scheme into another. The Deceased’s decision to effect the transfer was as a result of the fact that her original pension fund was over funded and the Deceased was concerned that the pension fund may revert in whole, or in part, to her ex-husband and his children. The Deceased did not wish for her ex-husband or his children to benefit from the fund.

The Deceased died on 18 December 2006 following her pension transfer. At the time of transferring her pension, the Deceased completed an expression of wishes in which she stated her wish that the death benefits from the pension be payable equally to her sons. The discretionary pension policy provided for a much wider class of beneficiaries.

One issue was whether the transfer between the pension policies amounted to a transfer of value that would have been chargeable to inheritance tax.

HMRC’s argument was that the Deceased made a disposition (i.e. the transfer) with the intention of construing a benefit on her sons and that her actions in not taking a pension during her lifetime should have compelled a conclusion that the transfer to the second pension policy was intended to confer a gratuitous benefit on her sons which would in turn be chargeable to inheritance tax.

The tribunal concluded, correctly in my view, that given the discretion that the pension trustees held over the fund, the transfer between the pension policies was not intended to confer a gratuitous benefit on any person and was therefore not chargeable to inheritance tax.

The second issue at hand was whether the Deceased’s actions in failing to take her pension during her lifetime could be treated as a disposition.

I can appreciate that the Deceased’s omission to take her lifetime benefits would increase the funds available to the pension trustees on the Deceased’s death for distribution, there was no evidence on which the tribunal could properly conclude that the transfer to the second pension and the omission were connected and part of any scheme to confer benefit on Mrs Staveley’s two sons.

The case appears to draw heavily on its individual facts and the question would remain as to whether in changing the facts of Mrs Staveley’s case to remove her wish to omit her ex-husband from potentially gaining a benefit from the pension, whether the tribunal’s decision in this case would have been different.

What this case does show is that there is a clear need for appropriate wealth planning measures to be in place, particularly where there has been a breakdown in family relationships.

If you wish to discuss your options with regard to wealth planning or  discuss how we can assist in planning for later life, please do not hesitate to contact me or one of our specialist team in Cardiff on 02921 921 1823.

David King, Principal Lawyer, Slater and Gordon, Cardiff.

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