A pilot trust is a vehicle for holding assets (usually money) which are received in the future. Pilot trusts are usually created for tax mitigation purposes.
An example would be a husband with a large pension death benefit who wants his wife to benefit in a tax efficient way.
He creates a pilot discretionary trust (also referred to as a spousal by-pass trust) with his wife and children as potential beneficiaries. He nominates the pilot trust to receive the pension death benefit.
On his death, the pension death benefit is paid into the pilot trust for the benefit of his wife and children. As it is in a trust it sits outside his wife’s estate for inheritance tax (IHT) purposes.
When his wife dies, the pilot trust fund is ignored when calculating her IHT. This results in a tax saving of up to 40% of the value of the pilot trust fund.
It is important to consider all legal, practical and tax implications before creating a trust. At Hart Brown we will guide you on the implications and help you set up a trust that best suits your objectives. We can also act as trustees of the trust.
To speak to someone who can help set up a pilot trust or advise on any other issues relating to wills, probate, trusts or other financial planning call, email or request a call back from one of our specialist lawyers.