death before and aftre 75

[Jupiter01]

Please excuse the naivety but trying to get my head around some basics of the IHT as of Apr 2027.
If there is a husband and wife that have property worth £1 mio and pension worth £2mio, the husband dies before age 75, everything goes to the wife IHT free and she pays no income tax on pension withdrawals? Could she at this point, withdraw £1mio a year from the pension without any income tax and gift 99% of it as surplus income to the kids and this would be immediately outside the estate?

1 more: if the wife passes away below age 75 and before she has been able to reduce the estate below the IHT limit, do the children pay any IHT or income tax on the pension withdrawals?

I understand the situation that occurs post 75 but wasn't sure on the above.

Thanks in advance.

[AGoodman]

>> If there is a husband and wife that have property worth £1 mio and pension worth £2mio, the husband dies before age 75, everything goes to the wife IHT free and she pays no income tax on pension withdrawals?

Correct in relation to withdrawals within 2 years of death

>> Could she at this point, withdraw £1mio a year from the pension without any income tax and gift 99% of it as surplus income to the kids and this would be immediately outside the estate?

Unclear. Basically, I don't believe there is clear law that taking two payments from the pension would be treated as income rather than capital lump sums. You would need proper advice and even then it may remain in doubt. If pushed, I would lean towards a capital treatment so no IHT exemption.

>> 1 more: if the wife passes away below age 75 and before she has been able to reduce the estate below the IHT limit, do the children pay any IHT or income tax on the pension withdrawals?

They would pay IHT on her entire estate, including withdrawals sitting in her account and (from 6/4/27) funds remaining in the pension. There shouldn't be income tax if taken as a lump sum within 2 years of her death.

[Jupiter01]

On the £1mio withdrawal, I was thinking that it could be spread over a year and hence income as opposed to lump sum gifting then.

Thanks for coming back to me on my questions. In simple terms, if I am 46 and still in my wealth building phase, should I continue to plough into my pension and then if I am still kicking around near the age of 75, make some mitigation plans. Else, as long as the wife understand the aggressive gifting strategy pre-75, it doesn't feel like I need to be too concerned about IHT at this stage or at least until, I am closer to age 75.

Please let me know how others are viewing this.