I have a client with not long to live. She has £150k of pensions and a £300k death in service benefit. Client’s daughter is 15, and severely autistic.
I propose discretionary trusts for the sums to be paid into with daughter as main intended beneficiary.
Is it best to set up two pilot trusts to split the funds and nominate the benefits to pay into the trusts to avoid IHT exit charge regime, or will these aggregate and be related settlements, making that pointless and just stick to one pilot trust?
Typically the pension scheme will take the form of a trust and in view of the rule that a payment from one trust to another is effectively ignored for IHT purposes it makes no difference how many ‘recipient’ settlements there are. E.g. if the client has two pension schemes each will have its own nil rate band allowance and will continue to be treated as such even if the funds are subsequently amalgamated into a single discretionary trust. The same is likely to hold true of a payment under a death in service scheme since the policy is normally held in a form of discretionary trust. The only reason to have separate trusts is for ease of record keeping.