Ill-health pension transfer not liable for IHT
A landmark case in the Supreme Court has ruled that a pension transfer made in ill health was not liable for inheritance tax.
In the recent case of Commissioners for Her Majesty’s Revenue and Customs v Parry & Ors (also known as the Staveley case) it was found that HMRC should not charge IHT on the claimant’s pension transfer.
Following a bitter divorce, Ms Staveley had transferred a portion of a pension she had set up with her husband into a new pot and left that to her sons. Because Ms Staveley died weeks later of a terminal illness, HMRC deemed the transfer to be a “chargeable lifetime transfer” and thus liable for inheritance tax.
However, the court found that the transfer had not been intended to improve her sons’ position but to eliminate the risk of any part of the funds being returned to her ex-husband and that Mrs Staveley did not intend to confer a gratuitous benefit on her sons.
This sets a new precedent for people who transfer their pensions while in ill-health and has exposed the complexity that exists around pension and IHT arrangements.
For more information on inheritance issues please contact the head of our private client department, Deborah Adams, on 01566 772 375 or at AdamsD@Parnalls.com
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