One gift, several trusts: why Rysaffe planning matters again
Peter McGahan
Monday 21st September, 2026.
INHERITANCE tax planning is one of those subjects where a simple idea can be buried under enough technical language to make you lose the will to live. Rysaffe planning is a decent example, so, bear with me.
If you are making a large gift into discretionary trusts, using several separate trusts, created on different days, can reduce future 10-year and exit charges compared with using one large trust.
That matters more now because from April 6, 2027 most unused pension funds and pension death benefits are due to be brought into the estate for inheritance tax.
For years, pensions were often the asset you left alone if you could. Spend other taxable assets first, let the pension grow, and it would often pass outside the estate. That planning order is changing because of the upcoming pension changes.
Government estimates suggest around 10,500 estates will become liable for inheritance tax where they previously would not, and another 38,500 will pay more. The average increase for affected estates is expected to be around £34,000. Easy money!
A discretionary trust can be useful where you want to make a genuine gift but do not want the beneficiary to have immediate control of the money. The trustees decide who benefits, when and by how much.
That can be invaluable where children or grandchildren are young, family circumstances may change, or where handing over £300,000 outright feels about as sensible as giving a teenager the keys to a Ferrari with a fluffy dice.
Gifts into discretionary trusts are normally chargeable lifetime transfers and relevant property trusts can face periodic Inheritance Tax charges at 10-year anniversaries, potentially at up to six per cent, plus charges when capital leaves the trust.
Rysaffe planning comes from a 2003 Court of Appeal case. In simple terms, trusts created by the same person on different days can be treated as separate settlements. Trusts created on the same day can be related, and later additions made to more than one trust on the same day can also be caught by separate rules.
Let me give you an example. Sarah wants to place £300,000 into trust for her grandchildren and has made no previous chargeable gifts.
One option is one discretionary trust with £300,000 in it.
Another is three trusts, created on different days, with £100,000 in each.
Assume each £100,000 grows to £200,000 after 10 years and, just to keep the arithmetic bearable, assume the nil-rate band is still £325,000.
The first trust has the full £325,000 available, so there is no periodic charge.
For the second, the earlier £100,000 gift reduces the available nil-rate band to £225,000. Still no charge.
For the third, the two earlier £100,000 gifts reduce the available band to £125,000. The trust is worth £200,000, leaving £75,000 exposed to the charge.
Six per cent gives £4,500.
Now put the same £300,000 into one trust and let it grow to the same £600,000.
The excess over £325,000 is £275,000. Six per cent is £16,500.
Same gift. Same investment growth. Different structure. £12,000 more tax.
There are cleverer ways to split the money. A larger amount in the first trust and progressively smaller amounts in later trusts can sometimes use the available nil-rate bands more efficiently.
But this is where tax planning can get too clever. Bear with me again!
The mathematically perfect answer may not be the best practical family answer. Three equal trusts may make perfect sense if they are intended for different children, grandchildren or branches of the family.
A gift must be a gift. You cannot move money away for tax purposes and carry on enjoying it as though nothing happened.
The order of other gifts can matter too, particularly where discretionary trusts, loan trusts and outright gifts are being combined. Getting the sequence wrong can affect later calculations.
Then there is the administration. More trusts mean more registrations, trustee decisions, records, reporting and ongoing cost.
Saving tax is useful. Creating a small administrative business in your spare bedroom to save less tax than it costs is not.
The pension changes do not mean everyone should rush out and build several trusts. They mean people with potential inheritance tax liabilities need to revisit the order of their planning.
What do you need to keep? What can you genuinely afford to give away? Who are you trying to protect? When should they receive the money?
Answer those first.
Then, if Rysaffe planning saves another £12,000 on the way through, excellent!
I am writing a guide to inheritance tax planning. If you would like a complimentary copy, you can email info@wwfp.net and it will be sent to you when it is complete.
Peter McGahan is the Chief Executive Officer of Independent Financial Adviser firm, Worldwide Financial Planning. Worldwide Financial Planning is authorised and regulated by the Financial Conduct Authority.
