Impact of the Nil rate band
The Nil Rate band allowance is £325,000. That sets the ceiling on how much you can put into a trust. You are allowed put more into a trust. However, if you put in anything more than £325,000 in any seven-year period, you will then generate an immediate tax charge of 20% for inheritance tax purposes. And nobody would want to pay that immediate inheritance tax fee.
Why put more into a Trust?
There could be some issues if somebody was on their deathbed and literally wanted to drop a million pounds into trust to preserve the residential Nil Rate Band. This is very rare and unusual.
Spreading the gifts into a Trust
Most of the time, people never put more than 325,000 pounds into a trust. Bear in mind there is a seven-year time frame. You could put £150,000 in and a year later put in another £175,000. As long as the total is not over £325,000 that would be fine.
This way, technically, you extend the timeframe for the gift into trust. But ideally, nobody puts more than £325,000 into a trust.
Trust planning requires experienced advice so call us if you need help