What Happens to a SSAS When Someone Dies?
If you have enrolled your spouse or children in the SSAS, then ideally all of your pension beneficiaries are already in the SSAS.
You Must Complete a Letter of Wishes
One of the most important things, which has become much more important in light of recent legislative changes, is that you have to fill out a Letter of Wishes. This is both a trust and a SSAS. It does not have to go through probate which is a huge advantage.
It means that we can handle matters quite promptly. We don’t have to wait for Probate. It is imperative that you specify in your Letter of Wishes the recipients of the remaining SSAS monies, provided that you haven't used up all of them..
Beneficiaries Inside the SSAS
One of the great advantages of SSAS is that, if all your beneficiaries are already in the SSAS, you’ve done all the planning. On your death, whatever value is left we will pass that on as an asset value to your beneficiaries inside the SSAS.
Therefore, it's possible that some SSAS members have previously contributed on their own and have also received a death bequest from a deceased member. If so, it means that as scheme administrators we must distinguish any cash left over after a member's death from a member's own contributions.
Funds kept in an individual's pot within the SSAS are handled differently than money they have contributed themselves. Indeed, they continue to grow tax-free and in that tax-free environment, but the member's age at death has a significant impact on how they are treated.
How Funds are Treated
If the member dies before the age of 75 and leaves a value to their beneficiaries inside the SSAS, it is quite likely that all of the funds that the beneficiaries receive can be placed into what’s known as the Dependant Drawdown. That is certainly the way we would suggest you go following recent legislation changes.
Money held in Dependent Drawdown can then be drawn out tax free by those beneficiaries for the rest of their lives. This is a tremendous legacy to leave inside the SSAS to your beneficiaries. This is when SSAS comes into its own more than any other time. This is also one of the huge advantages SSAS has over SIPPs.
SIPPS and the Death of a Member
SIPPs must be wound up within two years following a person's death. If the SIPP contains liquid assets, these must be sold or distributed to the beneficiaries who may need to create a new SIPP in order to retain the assets. You can see the possible issues that could arise.
Cascading Wealth to Your Beneficiaries Inside a SSAS
If you’ve got those assets held in SSAS, such as commercial property, then we pass on a share of the value of that property to your beneficiaries who are already in the SSAS. As you can see, it is a very easy process to cascade the wealth to your beneficiaries and potentially hugely tax efficient for them.
Income Tax on Drawings
If you die after the age of 75, your beneficiaries will be required to pay income tax on any money they receive when they eventually take it out. It is also important to remember that recipients of monies left to them, whether they die before or after the age of 75, may take money out of the SSAS at any time.
Supporting Your Loved Ones Through SSAS
Therefore, death bequests for your children allow them to receive the funds if they were under the new earliest retirement age of 57. This could be an enormous advantage for them, especially if they need the money to support their families and buy houses.
Consequently, having money in a SSAS and increasing your wealth is very advantageous. It enables you to transfer your money to your beneficiaries in a very tax-efficient way, with no need to pay Inheritance tax or Capital Gains tax, as we have mentioned in earlier videos. Therefore, when it comes to death benefits inside a pension scheme, keeping it in the SSAS and keeping it in pension is unquestionably the best course of action.
