Is it worth splitting large sums assured into different plans and trusts to take advantage of multiple nil rate bands to avoid periodic and exit charges?
With particularly large amounts of cover it can make sense to split these down into smaller policies and write each of these under a separate trust to help avoid the 10-yearly charges and exit charges that could arise on one big policy. The following example explains how it works. One plan is taken out for 500,000 today and written under the split trust. The client dies after nine years and six months. At the 10-year anniversary the money is still held in trust and the nil rate band is 400,000. Assuming there were no other chargeable lifetime transfers in the seven years before the trust was created the 10-yearly charge would then be 6,000 (i.e. 500,000 – 400,000 x 6%). If, however, two plans were written each for 250,000 and they were written in trust on different days, there would be no 10-yearly charge as both trusts have their own nil rate band and both have a value below this. The key though is that the trusts must be created on different days. This means that the trusts must be s
