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The inheritance tax implications of pension trusts
KEY POINTS
- 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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