Multiple discretionary settlements

by **Paula Henderson** on Wed Apr 27, 2011 10:48 am

I understand that if an individual sets up multiple DTs then each trust gets its own nil rate band.
However, if a DT was set up for say three beneficiaries and the settlor had expressed a wish for each one to be treated equally so the trustees, for admin purposes only ran three seperate "funds". They decided to separate the funds and run three DTs. Ignoringing CGT, would each one get its own NRB?

by **tax_schmax** on Wed Apr 27, 2011 12:04 pm

I'm not sure what you are saying. Are you saying that 1 trusts creates 3 sub trusts or are you saying that the primary trust is segmented for admin purposes?

by **Paula Henderson** on Wed Apr 27, 2011 2:52 pm

Sorry for not making myself clear.
I am saying that the primary trust is segmented for admin purposes to ensure equality for beneficiaries.
If that trust was then appointed to three seperate trusts because of differing requirements of beneficiaries, would each trust get its own nil rate band, because presumably if three different trusts were set up initially, then three nil rate bands would be available?
I know for CGT it would be a disposal, but for IHT, provided the settlor is the same, there are no IHT consequences. I am just wondering if three nil rate bands would be available?

by **tax_schmax** on Wed Apr 27, 2011 5:14 pm

I don't see that. For income tax, under very specific circumstances, yes I think you could use a sub-trust to get an extra basic rate allowance. If you are thinking about periodic and exit charges, I don't see a sub-fund as being able to provide any extra benefits there. The periodic charge is one of the lowest tax rates I know of. It may be inefficient to do anything other than pay the tax. I feel a bit guilty saying that on here.

The name for this type of planning is Rysaffe planning. Even if the Rysaffe arrangement is made at outset it can look a little contrived. The settlements need to be unrelated and often this is overlooked. I like to see different perpetuity periods, asset allocations and if possible trustees.