Pilot Trusts and Same Day Additions


(scarter) #1

Client has a death in service benefit of £500K payable at discretion of scheme trustees.

Client wants to create a pilot trust to receive that death benefit and will then complete an Expression of Wish form asking the scheme trustees to pay the death benefit to the trustees of the pilot trust.

If client created two pilot trusts on different days and after his death, the scheme trustees paid £250k to each pilot trust, again on different days, would you avoid the consequences of the same day addition rules (with the effect that each pilot trust has its own nil rate band for anniversary and exit charges)?

Steve Carter
Setfords Solicitors


(Paul Davidoff) #2

Section 81 Inheritance Tax Act 1984 will normally operate to treat both lots of £250k as remaining in the original settlement. Once deemed to be comprised in that original settlement, the taxable amount will be £500k again.

The ‘start date’ of the settlement for IHT purposes will be the date on which the individual joined the DISB scheme and the ten year anniversaries will be calculated by reference to that date, rather than the date of the pilot trust(s) or the date of death.

The individual should ask their employer for the date on which they became covered by the DISB, as it is not always the date on which the employment started.

The individual is normally the settlor for IHT purposes and so you would need to check their cumulative total for the relevant period before joining the scheme.

Paul Davidoff
New Quadrant Partners Ltd