Determining how your estate, which includes property, savings and investments is shared amongst your loved ones is the key aim when writing a Will.
However, when making a Last Will and Testament it is important to realise that your pension is not automatically part of your estate and if separate provisions for your pension or death benefits are not made then funds paid upon death could be included in your estate and be subject to inheritance tax.
How to make it clear who gets your pension when you die?
Since the introduction of pension freedoms in April 2015 policyholders can leave their pension to anyone they choose, it does not have to be their spouse or dependants.
After your death if you have not arranged an ‘expression of wishes’ for your pension your pension provider will decide who will receive your pension savings, which is how the funds could be added into the estate and included for inheritance tax purposes.
If you are a pension policyholder you should ensure you have completed an ‘expression of wishes’ or ‘nomination form’, which you should have received when you took out your pension. This will make it clear to your pension plan provider how you want your funds handled upon your death.
3 reasons why you should not include your pension in your Will.
If you do not make special arrangements for your pension and rely on your Will to distribute your funds this could cause many issues for those left behind, such as;
- 1. If the money is included in your estate it could be subject to an expensive tax bill.
- 2. The pension provider will need to investigate how the funds should be distributed using the Will or other information as guidance, which could delay payment to dependants.
- 3. The funds could be distributed to the unintended person.
Our Will writing service now includes an optional pension review.
We often see clients who want to update their Will due to changes within their family dynamics because they have remarried for example, however, we find they have not considered their pension and made arrangements to update their ‘expression of wishes’. We recognise you may need specialist advice on this matter so we can assist you with seeking the right financial help.