IWC are regulated by the Society of Will Writers and Estate Planning Practitioners

 

Immediate Post Death Interest Trusts are trusts used for inheritance tax planning. When combined with a Pilot trust or even multiple Pilot Trusts, it is very possible to mitigate all of a married couples inheritance tax bill.

 

Quite simply an Immediate Post Death Interest Trust or IPDI is a clause placed into a Will, enabling the executors of that persons will to place the deceaseds entire estate into the Immediate Post Death Interest Trust. This trust would be for the benefit of any surviving spouse as such there would be no inheritance to tax pay on the death of the first spouse. In addition, under current inheritance tax rules, the first spouse's nil rate allowance would remain in tact and could be utilised on the death of the second spouse.

 

Over the remainder of the surviving spouses life the executors could use powers written into the Will to transfer funds to pilot trusts which would have had to have been set up before the first spouse passed away. In order to mitigate the entire Inheritance tax bill You would need to set up one pilot trust for every £325k (nil rate band 2009/2010) over £650k (two times the nil rate band).

 

Because the Pilot Trusts are managed so as to hold under the nil rate band there would be no annual or exit charges. Provided the second spouse lived more than seven years from the date of the transfer of funds, the money would escape the Potentially Exempt Transfer rules and thus not recalled into the second persons estate when they died. The entire estate could be held in the pilot trusts and the IPDI could be depleted until there was only £650k held.

 

On the death of the second spouse the IPDI trust would then pass to the next line of beneficieries and assuming there was no more than £650k there would be no inheritance tax to pay because the estate would still benefit from two nil rate band allowances.

 

If you would like to know more information about Immediate Post Death Interest Trusts or Pilot Trusts please call us on 0845 600 3527

 

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