We explain, in plain English, how families have used several trust structures over a lifetime to shield value from IHT. Our aim is practical. We show what these arrangements try to achieve: moving property and assets out of an estate while keeping sensible family safeguards in place.
We outline the core idea simply: the tax system looks at how much value leaves your estate and when. Timing and paperwork matter as much as the trust itself. This approach often suits homeowners aged 45–75 who want to protect children and grandchildren.
We introduce the planning logic behind a careful spread of gifts over years, staying within allowances and avoiding accidental triggers that create extra charges. For practical examples of frameworks and settlor order, see a useful guide on a three‑trust framework. For advice on securing property in trust, read detailed guidance at protect your property in trust.
Key Takeaways
- Practical focus: control dates, documentation and funding rather than legal jargon.
- Timing matters: when value leaves an estate affects IHT outcomes.
- Spreading gifts over a lifetime helps stay within allowances and reduce risk.
- Property planning must consider relevant property rules and the nil rate band.
- We will cover ten‑year and exit charges and recent same‑day changes.
How using multiple trusts to manage inheritance tax exposure uk works in practice
In real planning, the timing and character of each trust decide whether a nil allowance can apply again. We explain what HMRC treats as relevant property and why that status means ongoing IHT charges under the relevant property regime.
Relevant property covers discretionary-style arrangements where assets sit in trust and are not held for a single beneficiary. That placement draws the regime’s periodic and exit charges.
Historically, people repeated the nil rate band by creating separate structures on different days. The classic Rysaffe approach relied on this principle: more than one trust could each attract a nil allowance if funded on distinct dates.
What changed from April 2015
From 6 April 2015 new rules limited “same day” additions. If several settlements were funded on the same day they could share one nil rate only.
Trusts set up before 10 December 2014 kept protection, provided no further same‑day additions were made after that date or additions stayed below £5,000. Wills drawn before 10 December 2014 and death before 6 April 2017 also had transitional cover.
- Practical takeaway: the law did not ban more than one trust, but the date and clear paperwork became essential for compliant tax planning.
Setting up and funding multiple trusts without falling foul of the “same day” rules
Good planning nails the date and record‑keeping as much as the legal form of the arrangement.
Choosing the right structure matters. Discretionary arrangements give family flexibility but sit in the relevant property regime and can face periodic and exit charges. Pilot arrangements keep pots separate and help when the aim is a clean split of value.
Establish on different days and keep a short deed note that records the day, the settlor, the value transferred and the purpose.
Funding rhythm and settlor position
Many families settled value up to the nil rate band and then waited several years before a fresh transfer. Waiting the seven years between major gifts reduced charge risk.
Keep control through trustees and letters of wishes. Avoid arrangements that make the settlor look like the recipient for income purposes. A deed of variation within two years of death can route an inheritance into a discretionary arrangement, but that can create income tax consequences if the original beneficiary (or their spouse) can benefit.
Common pitfalls and a quick checklist
- Watch same‑day top‑ups: they can link arrangements and cancel separate allowances.
- Avoid casual top‑ups to older settlements after protected dates.
- Keep clear records: dates, reasons, transfers and deeds of variation.
| Issue | What to do | Why it matters |
|---|---|---|
| Same‑day funding | Stagger transfers on different days and note time and purpose | Preserves separate nil rate claims and avoids aggregation |
| Deed of variation | Use within two years of death; record beneficiary status | Can move property outside the estate but watch income rules |
| Settlor control | Use trustees and letters of wishes; avoid direct benefit rights | Helps protect tax position and family intent |
For practical next steps and a fuller guide on how we help clients secure their plans, see our short guide to secure your family’s future.
Calculating inheritance tax, ten-year charges and exit charges under the relevant property regime
We explain how periodic and exit levies are calculated, and which numbers trustees must watch.
How ten‑year (periodic) charges are worked out
At each ten‑year anniversary the trustees calculate the value of the trust and compare it with the nil rate band equivalents held against the settlement. The result gives an effective rate that can produce a charge up to a 6% cap.
The rate band in this context means the slice of nil‑rate entitlement available to that settlement, not the headline personal allowance people often expect.
How exit charges apply and why timing matters
An exit charge arises when assets leave a settlement. The trustees look at the value at the exit date and the time since the last ten‑year anniversary.
Longer gaps after an anniversary usually reduce the effective rate. Exiting soon after a ten‑year point can increase the charge.
Post‑2015 simplification
From 6 April 2015 non‑relevant property no longer needs inclusion in ten‑year or exit calculations. This rule cut complexity for many discretionary arrangements under the relevant property regime.
Keep assets under review
Regular valuations, clear records and thinking ahead about planned exits help lower future liabilities. Note the key dates: settlement date, ten‑year anniversary, current value and any past exits.
| What you need | Why it matters | Action |
|---|---|---|
| Settlement date | Starts the first ten‑year period | Record deed and value on that day |
| Ten‑year anniversary | Triggers periodic charge calculation | Arrange valuation and apply relevant rate band |
| Exit date & value | Determines any exit charge | Plan timing; quantify effect on effective rate |
For practical payment options and planning scenarios see our short guide on paying IHT in instalments.
Conclusion
The real value in careful arrangements lies in control over when assets leave an estate and why.
Well-set plans are not magic. When families use multiple trusts sparingly and with clear dates, they can protect property across a lifetime and limit sudden charges on death.
Keep paperwork simple and act early. Avoid same‑day top-ups, keep clear records and treat trust administration as part of your overall tax and estate plan.
Remember that ten‑year and exit charges can apply, but those costs will often sit against a 40% inheritance tax hit on passing an estate outright. A useful concession is that a will appointment in favour of a surviving spouse made within three months of death may be read back into the will and exempt.
Next steps: confirm objectives, map your estate, choose the right trust approach and set a review rhythm. For practical guides on how trust funds can help, see how trust funds can help avoid inheritance.