In the chancellor’s autumn statement he dropped plans for a general review of inheritance tax and trusts. However the government has now published draft legislation targeting multiple-trust inheritance tax (IHT) planning.
If you have previously set up several trusts (commonly referred to as “pilot trusts”) as a way of utilising multiple IHT nil rate band exemptions when you die, then you should take advice and review your circumstances in light of the proposed changes, which if made law would come into effect on 6 April 2015.
The current position is that an individual can create several pilot trusts in their lifetime with a nominal sum in each one (say £10) into which via their Will on death they divide their estate. Each such trust is entitled to its own full IHT nil rate band exemption (currently £325,000). So, for example, a net estate of £3 million would be divided between 10 such trusts.
Now the proposal is that an individual will no longer be able to utilise multiple nil rate bands and instead will only be able to use a nil rate band every seven years. Those of you who already have pilot trusts set up could be affected.
This is all part of the government’s general tax anti-avoidance stance and it is important that those with existing pilot trusts review their Wills.
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