Pilot trusts—IHT
Produced in partnership with Emma Haley of Boodle Hatfield LLP

The following Private Client practice note produced in partnership with Emma Haley of Boodle Hatfield LLP provides comprehensive and up to date legal information covering:

  • Pilot trusts—IHT
  • Pilot trusts in practice
  • Pilot trusts and inheritance tax (IHT) planning
  • Pilot trusts and Will planning
  • Creating pilot trusts
  • Merging trusts

Pilot trusts—IHT

A pilot trust is a lifetime trust set up with a nominal amount (typically a small sum of cash such as £10) which does not become active until further funds are added subsequently. It is very common to establish a trust in this way. The initial sum gets the trust started so that it is ready to accept the main assets at a later date.

Pilot trusts in practice

Many trusts start off as pilot trusts. The main trust assets may be added fairly soon after the pilot trust commences. For example, someone who wants to settle a property into trust could make a pilot trust first and shortly afterwards transfer the property into the trust by a HM Land Registry transfer to the trustees.

Alternatively, some pilot trusts will not receive further funds for some years and will effectively sit dormant in the meantime. For example, a pilot trust could be used as a vehicle which might later receive pension death benefits, should those benefits become payable.

In the past a series of pilot trusts was sometimes used for tax planning purposes. Future IHT planning using this technique is no longer effective as a result of Finance (No 2) Act 2015, as considered further below.

Pilot trusts may also be used in conjunction with a Will so that the trusts will be established during the client’s lifetime

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