Pilot trusts and Will planning

Produced by a Tolley Trusts and Inheritance Tax expert

Trusts and Inheritance Tax

Guidance

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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:

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