Pilot Trusts Explained

Published / Last Updated on 27/11/2013

You can make gifts to a discretionary trust today, however if you go over the nil rate inheritance tax allowance you create an inheritance tax liability today. There is also a periodic charge every 10 years if the trust exceeds the nil rate band.Pilot trusts are a series of small discretionary trusts, set up one per day each with a small amount under the nil rate band and must be arranged before your death. When you die, your estate pays full inheritance tax if due and the balance can then be distributed by your will to each small pilot trust. For future generations there is now potentially no inheritance tax due if the trusts are below the nil rate band nor the 10 year, 6% periodic charge.