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Question of trust

11 February 2014 / John Woolley
Issue: 4439 / Categories: Comment & Analysis , Inheritance Tax , Trusts

The inheritance tax implications of pension trusts


  • Inheritance tax may be payable by the trustees of a by-pass trust.
  • Nil rate band applicable to different trusts set up by one taxpayer.
  • Accrued benefits from several trust-based pension schemes.
  • Ten-year charges must be reported to HMRC.
  • Rysaffe planning is under threat.

The inheritance tax treatment of trusts that hold money paid out from a pension scheme on the death of a member frequently creates difficulty for practitioners.

These “by-pass trusts” come into existence as a result of the pension scheme trustees making a payment either to an integrated trust where the scheme rules say that the trustees must pay death benefits to a trust that has been declared by the member or to a pilot trust usually set up by the member...

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