Trusts and Inheritance Tax

Pilot trusts and Will planning

Produced by Tolley
  • 22 Dec 2021 18:41

The following Trusts and Inheritance Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Pilot trusts and Will planning
  • The tax advantage of pilot trusts
  • Changes affecting the advantage of pilot trusts
  • Exceptions to the same day addition rule
  • Effective date and protected settlements

Pilot trusts and Will planning

A ‘pilot trust’ is one that holds a nominal amount of property (typically a small sum of cash) and does not become active until further funds are added later. The later addition is sometimes made on the client’s death by a gift in his Will. The use of pilot trusts in conjunction with Wills became a popular planning tool for mitigating inheritance tax for the next generation of beneficiaries. It worked by fragmenting the deceased estate after death so that it was held in more than one trust. Going forward, inheritance tax would be reduced because each trust would benefit from its own nil rate band.

The advantage of pilot trusts in Will planning was curtailed by changes introduced by F(No 2)A 2015. Different rules apply to occasions of charge arising on or after 18 November 2015, the date of Royal Assent. However, Wills and trusts created before 10 December 2014 may still benefit from the planning.

This guidance note explains:

  1. how pilot trusts could deliver a tax advantage

  2. the effect of the current rules

  3. the transitional concessions

The tax advantage of pilot trusts

Although the advantages outlined in this section were effectively removed by F(No 2)A 2015, practitioners will still encounter situations where the planning has been put in place.

A client who wants his estate to be held in trust after his death can establish a trust in his Will (see the Will trusts guidance note). If the trust in question is a relevant property trust, it will

Access this article and thousands of others like it
free for 7 days with a trial of TolleyGuidance.

Think Tax.
Think Tolley.

Critical, comprehensive and up-to-date tax information

LEARN MORE LEARN MORE

Popular Articles

Quick succession relief

What is quick succession relief?Quick succession relief (QSR) reduces the tax payable when the same property has been subject to more than one charge to IHT. It applies where there have been two chargeable transfers on which tax is payable within a period of five years.Although commonly called QSR,

19 Oct 2021 23:10 | Produced by Tolley Read more Read more

Loans written off

Companies sometimes provide directors, employees or shareholders with low interest (or interest-free) loans either as part of the reward package or on special occasions to help the individual meet significant expenditure. The employment income implications of these loans are discussed in detail in

25 Oct 2021 14:12 | Produced by Tolley Read more Read more

Investors’ relief

Investors’ relief is a capital gains tax (CGT) relief on the disposal of qualifying shares in an unlisted company. A taxpayer making a disposal that qualifies for investors’ relief will pay tax at a rate of 10%.Although it is a separate relief, the rules for investors’ relief were intended as an

22 Dec 2021 21:32 | Produced by Tolley Read more Read more