Pilot Trusts by Abacus
A pilot trust is set up during an individual’s lifetime and is a type of discretionary trust. Opened with as little as one pound, assets can be added to the trust at a later stage during the individual’s lifetime, or even on death through a legacy in their Will. It is also possible for an individual to open more than one pilot trust fund during their lifetime. These are suitable for estates up to £2million.
Though tax will still need to be paid on the deceased’s estate, the more pilot trusts made during their lifetime, the less tax that would potentially need to be paid. Currently, the ‘nil rate band’ (NRB) for an estate is £325,000 (this is the first £325,000 of an estate which does not get taxed), if pilot trusts are made however; they will each benefit form their own NRBs. This is particularly ideal for larger estates.
However, a pilot trust will have its own inheritance tax system: every ten years there will be a charge of up to 6% as well as an ‘exit charge’ for removal of assets from the pilot trust, unless the value of the trust remains below the NRB of £325,000, in which case there will be no charge.