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Trust Pilot

Pilot trust restrictions extended to pre-existing wills from 6 April

On the 10 December 2014, the government announced measures to put an end to the use of multiple trusts, (otherwise known as pilot trusts or Rysaffe planning) as a way to mitigate liability to inheritance tax.

 

The idea of using multiple discretionary trusts was to enable each of the trusts to claim a complete nil rate band, which could result in a significant reduction in the effective rate of tax payable on any periodic or exit charges.

 

The measures introduced affect any additions of property on the same day (for example, on the date of death) to two or more trusts created by the same settlor, as these would be treated as related settlements for inheritance tax purposes. Taxpayers can no longer avail themselves of multiple nil rate bands by creating multiple trusts through their will, then on death adding substantial amounts of property.

 

However, as a transitional measure where the deceased’s will makes transfers into multiple trusts on death, the settlements are protected from the rule provided the will was ‘substantially’ drawn up before 10 December 2014 and death occurs before 6 April 2017.

 

As this deadline is reached shortly, it is crucial for clients whose wills were drafted before 10 December 2014 and use multiple trusts to seek professional advice as soon as possible. Failure to do so could leave the trustees with unexpected tax liabilities in the future.

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Canada Life Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.

Canada Life International Limited and CLI Institutional Limited are Isle of Man registered companies authorised and regulated by the Isle of Man Financial Services Authority.

Canada Life International Assurance (Ireland) DAC is authorised and regulated by the Central Bank of Ireland.

Stonehaven UK Limited and MGM Advantage Life Limited, trading as Canada Life, are subsidiaries of The Canada Life Group (U.K.) Limited. Stonehaven UK Ltd is authorised and regulated by the Financial Conduct Authority. MGM Advantage Life Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority.