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Help. My wife retired in February but died in March. Knowing…

Help. My wife retired in...
Help. My wife retired in February but died in March. Knowing she had a terminal illness she decided to complete her retirment forms ensuring I would get maximum monies. Between her pension 'lump sum' and total cash in from her AVC, the total of £107k+ was paid into our joint acount. i, of course, now have this money. Question No1 - am I due to pay tax on this? My wife also wanted me to give money to our 2 children. I want to make a paymeny of £20k to each of them. Question No2 - Can I give this money to my kids without incurring any tax problems
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4/11/2013
Sam
Sam, Accountant
Category: UK Tax
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Hi

 

Thanks for your question

 

I am sorry to hear of the loss of your wife, may I offer my condolences.

 

No you are not liable to tax on these lump sums, as they were paid due to her death. so have no income tax consequence, and also are not considered for Inheritance tax, as anything left the surviving spouse, is not used within the Inheritance tax threshold.

But any income you earn from this lump sums (such as interest or dividend payments)

could form a liability to tax, if you are a taxpayer.

 

Then you are free (without any tax consequence, to them or you) to gift £20,000 to each of your children.

Just make sure that you make a note of the amounts, the date and to whom the gifts made, as if you were not to survive more than 7 years, then these would need to be considered on your estate (But of course as you have an Inheritance tax threshold of £325,000 plus you would have any of your late wifes unused threshold, if your total estate is less than this combined tax free limit, then you will have no Inheritance tax consequence to consider either)

 

Let me know if you have any follow up questions, but if I could trouble you to rate the level of service received, this ensures I am paid. And any feedback and/or bonus are always most welcome.

 

 

Thanks


Sam

 

Sam
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