The eighth addition to the range of FundsNetwork multi-asset trusts is designed to be used in conjunction with the FundsNetwork Sipp by protecting lump sum death benefits from a future charge to IHT on the death of their spouse. The trust can be established at the same time as setting up a Sipp or at any pre-retirement point thereafter.
The trust seeks to overcome the increased IHT liability created with the pre-retirement death of a Sipp member when death benefits are paid to the surviving spouse. Although there is generally no IHT to pay at that time, the death benefits increase the value of the spouse’s estate. If unspent on the spouse’s death, the lump sum benefits are potentially liable to a 40 per cent IHT charge.
Through the new trust, the lump sum death benefits do not become part of the spouse’s estate but are still accessible during his or her remaining lifetime. The member nominates the trust to receive the death benefits, allowing a wide range on potential beneficiaries, including the spouse to benefit from it.
FundsNetwork head of tax and trust solutions Paul Kennedy says: “In essence, it’s a very simple trust that can save a considerable amount of IHT. It’s likely to be particularly suitable for married couples although as ever with IHT planning, there are a number of technicalities of which the adviser should be aware. As we do with all our trusts, we have also produced a very comprehensive guide to accompany the trust itself.”