Spousal By-Pass Trust

Many employers offer death in service benefit as part of the employees benefit package, this is often two, three, four even five times base salary. This provides a significant pot on money upon the employees death to help a family survive.

If no action is taken this money will by default be paid into the deceased estate and as such could be subject to 40% inheritance tax.

A simple Spousal By-Pass Trust included within a Will could ensure that no inheritance tax is payable on this lump sum.

By Creating a Spousal By-Pass Trust the death in service benefit is paid in a trust fund where the nominated trust beneficiaries  can withdraw the money as and when required with the agreement of the Trustees.

In addition to potentially reducing inheritance tax on first death it also means the money could be passed down to subsequent generations without the need to ever p[ay inheritance tax.

As an example Mr. Brown has a salary of £50,000 and his death in service benefit is four times his salary.  When he dies the death in service benefit is £200,000 this could be subject to 40% inheritance tax, potentially leaving Mr. Browns family with a bill of £80,000.

By creating a simple death in service trust (spousal by-pass or pilot trust) we could eradicate this £80,000 tax bill.

These kinds of trust are not limited to death in service or pension fund returns but can also be used for life insurance policies.

They provide an effective means  diverting large sums of money from your estate and ensuring inheritance tax liabilities are minimised.

For more information on how a Spousal By-Pass Trust / Pilot Trust or Death in Services Trust could benefit your family please contact us.

Spousal By-Pass Trust | Death In Service Trust | Pilot Trust