SIPP By-Pass Trust from Fidelity aims to cut IHT liabilities

Fidelity FundsNetwork has launched a SIPP By-Pass Trust to help advisers tackle the increasingly complex tax burden faced by their clients. Designed to be used in conjunction with the FundsNetwork SIPP, the By-Pass Trust can protect a client's SIPP lump sum death benefits from a future charge to IHT on the death of their spouse. The trust can be established at the same time as setting up a SIPP or at any pre-retirement point thereafter.

A particular problem can arise, where following the pre-retirement death of a SIPP member; death benefits are paid to the surviving spouse. Whilst, there is generally no IHT to pay at that time, the problem arises in that the death benefits increase the value of the spouse's estate. This means that on the spouse's death the lump sum benefits, if unspent, are then potentially subject to a 40% IHT charge.

The new SIPP By-Pass Trust seeks to overcome this by ensuring that the lump sum death benefits do not become part of the spouse's estate, whilst at the same time ensuing the spouse is still able to benefit from them during his/her remaining lifetime. The member nominates the trust to receive the death benefits, which allows a wide range on potential beneficiaries, including the spouse to benefit from it.

Paul Kennedy, Head of Tax and Trust Solutions, FundsNetwork, comments: "Feedback from advisers combined with the success of our SIPP meant that developing the new SIPP By-Pass Trust was a natural extension to our range of Multi-Asset Trusts. In essence, it's a very simple trust that can save a considerable amount of IHT. It's likely to be particularly suitable for married couples although as ever with IHT planning, there are a number of technicalities of which the adviser should be aware. As we do with all our trusts, we have also produced a very comprehensive guide to accompany the trust itself."