SIPP distribution on death
Mar 22nd 2024, 7:30 pm
#16
Furby
Joined: Apr 2016
Location: St. Louis, MO.
Posts: 874
Re: SIPP distribution on death
Thanks for posting the information dualmomma. It’s very interesting to see how an argument for the tax free nature of the SIPP can be made by a professional. In your case I think you have a major win here. Sounds like after paying the initial fees there are significant tax savings and you have the legal opinion and insurance you need to defend your position. The worst case scenario is the IRS does not agree with you and require that you pay the appropriate taxes, plus an accuracy related fee of 20% of the unpaid tax, plus interest, and likely a major audit on top of that. If you have a cast iron agreement that the lawyer will cover all penalties and interest with no additional professional fees then you are only on the hook for the unpaid tax which you would have had to pay anyway, so you are only out the initial fee to obtain the legal opinion and file your 2023 taxes. Sort of like an insurance premium, hopefully you don’t need it and would rather not pay it, but priceless if you do.
Having looked at what you posted I think I can see the argument that can be made for the tax free nature of your SIPP inheritance and possibly a tax free 25% lump sum pension payment, and although I think it is word smithing the tax treaty and goes against the intent of it, in the legal world words matter and they may have left the door open for a reasonable argument here (more on that later).
Of course, and I am sure you are aware of this, you likely will have to file and FBAR and Form 8938 if you received the funds into a foreign account. Also, if the overall inheritance exceeds $100,000 you will have to file Form 3520 anyway. I might get the same lawyer to do your 2024 tax return next year to ensure that all i’s and t’s are dotted and crossed.
In your shoes I would rest easy, and pat yourself on the back for pursuing this purse of action in spite of all the nay sayers (myself included).
Having looked at what you posted I think I can see the argument that can be made for the tax free nature of your SIPP inheritance and possibly a tax free 25% lump sum pension payment, and although I think it is word smithing the tax treaty and goes against the intent of it, in the legal world words matter and they may have left the door open for a reasonable argument here (more on that later).
Of course, and I am sure you are aware of this, you likely will have to file and FBAR and Form 8938 if you received the funds into a foreign account. Also, if the overall inheritance exceeds $100,000 you will have to file Form 3520 anyway. I might get the same lawyer to do your 2024 tax return next year to ensure that all i’s and t’s are dotted and crossed.
In your shoes I would rest easy, and pat yourself on the back for pursuing this purse of action in spite of all the nay sayers (myself included).
Mar 22nd 2024, 10:09 pm
#17
Just Joined
Thread Starter
Joined: Mar 2023
Posts: 24
Re: SIPP distribution on death
Thanks for posting the information dualmomma. It’s very interesting to see how an argument for the tax free nature of the SIPP can be made by a professional. In your case I think you have a major win here. Sounds like after paying the initial fees there are significant tax savings and you have the legal opinion and insurance you need to defend your position. The worst case scenario is the IRS does not agree with you and require that you pay the appropriate taxes, plus an accuracy related fee of 20% of the unpaid tax, plus interest, and likely a major audit on top of that. If you have a cast iron agreement that the lawyer will cover all penalties and interest with no additional professional fees then you are only on the hook for the unpaid tax which you would have had to pay anyway, so you are only out the initial fee to obtain the legal opinion and file your 2023 taxes. Sort of like an insurance premium, hopefully you don’t need it and would rather not pay it, but priceless if you do.
Having looked at what you posted I think I can see the argument that can be made for the tax free nature of your SIPP inheritance and possibly a tax free 25% lump sum pension payment, and although I think it is word smithing the tax treaty and goes against the intent of it, in the legal world words matter and they may have left the door open for a reasonable argument here (more on that later).
Of course, and I am sure you are aware of this, you likely will have to file and FBAR and Form 8938 if you received the funds into a foreign account. Also, if the overall inheritance exceeds $100,000 you will have to file Form 3520 anyway. I might get the same lawyer to do your 2024 tax return next year to ensure that all i’s and t’s are dotted and crossed.
In your shoes I would rest easy, and pat yourself on the back for pursuing this purse of action in spite of all the nay sayers (myself included).
Having looked at what you posted I think I can see the argument that can be made for the tax free nature of your SIPP inheritance and possibly a tax free 25% lump sum pension payment, and although I think it is word smithing the tax treaty and goes against the intent of it, in the legal world words matter and they may have left the door open for a reasonable argument here (more on that later).
Of course, and I am sure you are aware of this, you likely will have to file and FBAR and Form 8938 if you received the funds into a foreign account. Also, if the overall inheritance exceeds $100,000 you will have to file Form 3520 anyway. I might get the same lawyer to do your 2024 tax return next year to ensure that all i’s and t’s are dotted and crossed.
In your shoes I would rest easy, and pat yourself on the back for pursuing this purse of action in spite of all the nay sayers (myself included).
Yes, I file FBAR and Form 8938 every year as I have bank accounts in the UK with balances in excess of $10,000. And yes, Form 3520 is being filed for the house inheritance as well as the SIPP inheritance.
I plan to have the same lawyer file my 2024 tax returns!
