One gift, multiple trusts: the case for Rysaffe planning

Last updated 2 September 2026

The potential hike in inheritance tax (IHT) liabilities from next April, following the inclusion of pensions in taxable estates, has led to advisers looking at ways to minimise the impact on their clients.

Government estimates suggest the average IHT liability will increase by around £34,000. This has created renewed interest in trust planning for clients seeking to make an IHT effective gift which reduces their estate, but allows them to retain some control over the gift.

For large gifts, splitting the gift across more than one trust created on separate dates, known as Rysaffe based planning, can reduce trust IHT charges. This article explains the Rysaffe principle and how it can be used with trust planning to increase tax efficiency and, ultimately, maximise the transfer of wealth from one generation to the next.

What is the Rysaffe principle?

The ‘Rysaffe’ principle resulted from a case in 2003 when HMRC contended that a series of discretionary trusts established on successive days was caught by the associated operations rules and should therefore be treated as just one settlement for IHT when calculating the 10 yearly charges. As a result, more tax would have been due.

The Court of Appeal rejected this assertion, determining that discretionary trusts created on different days should be treated as separate settlements and taxed as such, resulting in a lower tax charge than a single settlement.

What does Rysaffe planning achieve?

Dividing a large gift between several discretionary trusts created on different days can potentially reduce the 10-year anniversary charge and exit charges on any distributions between these anniversaries.

Rysaffe planning example

Laura wishes to make a gift of £300,000 for the benefit of her current and future grandchildren. She has not made any previous gifts.

She creates three discretionary trusts on different days with a gift of £100,000 into each. The trustees invest the gifts into an offshore bond.

At the first 10-year anniversary, and to keep the example simple for the purpose of demonstration, assume that each bond has doubled in value to £200,000. No withdrawals have been taken.

There is no initial charge because the cumulative value of the CLTs is £300,000 and below her NRB.

The NRB available to each trust will be reduced by the initial gifts made into the preceding trusts. The periodic charge on each trust at the 10-year anniversary, assuming the NRB remains at £325,000, is:

	Amount gifted	10 year value	Available NRB	Excess	Periodic charge
Trust 1	£100,000	£200,000	£325,000	£0	£0
Trust2	£100,000	£200,000	£225,000	£0	£0
Trust3	£100,000	£200,000	£125,000	£75,000 x 6%	£4,500
Total	£300,000	£600,000			£4,500

Had Laura used one trust for the gift, the outcome would have been:

	Amount gifted	10 year value	Available NRB	Excess	Periodic charge
Trust 1	£300,000	£600,000	£325,000	£275,000 x 6%	£16,500

By dividing the gift equally into three trusts, the overall tax saving in this example is £12,000.

This simple example demonstrates the savings that can be made using the Rysaffe principle. It's not necessarily the optimum solution. For the same total gift, further savings could typically be made by:

increasing the number of trusts used and/or
allocating a larger amount to the first trust and progressively smaller amounts to each subsequent trust.

In the above example, splitting the £300k gift between the same three trusts in the proportions £162,500, £81,250 and £56,250 and, again that the trust value doubles over 10 years, provides a tax saving of £14,625 compared using a single trust.

	Amount gifted	10 year value	Available NRB	Excess	Periodic charge
Trust 1	£162,500	£325,000	£325,000	£0	£0
Trust2	£81,250	£162,500	£162,500	£0	£0
Trust3	£56,250	£112,500	£81,250	£31,250 x 6%	£1,875
Total	£300,000	£600,000			£1,875

Splitting in this way means there is less unused headroom in trusts 1 and 2 and a smaller excess in trust 3.

However, the optimum allocation may be sacrificed for an equal split where for example each trust may be earmarked for a specific beneficiary or bloodline.

The examples demonstrate the potential benefit to trust periodic and exit charges by incorporating Rysaffe planning. However, it's worth remembering that it does not reduce the initial lifetime charges on the total gifts into each discretionary trust. The IHT charge on entry will be the same whether the gift is made into one trust or spread across multiple trusts.

Combining Rysaffe planning with other gift planning

Individuals who wish to gift more than the NRB without an initial tax charge could consider making direct gifts to beneficiaries or gifts under absolute trust, both of which are potentially exempt transfers (PETs).

To minimise the 10-year charges on any Rysaffe based discretionary trusts, it's generally best to make these after the discretionary trusts. This is to ensure that should the PETs become chargeable on the death of the settlor within seven years of making them, they will not reduce the NRBs at the 10-yearly anniversaries.

Combining with a loan plan is also an option. A discretionary trust loan plan could be used, but in this instance it would be prudent to set this up before any gift plan trusts. This is because the chargeable lifetime transfer into a loan plan is zero and will have no impact on the NRBs available to the gift trusts at 10-year anniversaries - if a loan plan is set-up just after the gift plans, the total paid into the gift trusts will use up some or all of the NRB available to a discretionary loan plan at each 10-year anniversary.

If an individual is making a large loan on its own, it may also be worth considering breaking this up into two or more discretionary trusts on different days to maximise the NRB available to each one at the 10-year anniversary. As the value transferred is zero, each trust will have a NRB of up to £325k (at current rates) allowing more headroom when growth is assessed to the 10-year charge.

Rysaffe and planning with protection policies

High net worth individuals may consider taking out a protection policy in discretionary trust to compensate their beneficiaries for large IHT bills suffered on the estate.

Periodic charges could be due if the market value of the policy exceeds the trust NRB at each 10-year anniversary, for example, where the life assured is in poor health. Similarly, a charge could arise if a claim has been made on the death of the life assured and the proceeds have not been distributed before the next 10-year anniversary.

A Rysaffe approach could be beneficial in these circumstances by dividing the sum assured into several smaller policies and placing each in trust on different days, maximising the NRB available to each trust.

However, if the life assured is in good health at a 10-year anniversary, the value of a term policy and indeed the value of most modern whole of life policies is likely to be negligible. In such circumstances, a multiple trust strategy may be unnecessary.

Regarding whole of life policies, a ‘special valuation’ rules apply to the initial transfer into the trust to determine whether the 20% tax charge may arise. Under this rule, the total value of premiums paid since the start of the policy could be used as the deemed transfer of value if greater than the market value of the policy. However, it is our understanding that these special valuation rules do not apply for the purpose of calculating periodic and exit charges. This is because there is a requirement for the policy to cease to be part of the transferor’s estate for these special valuation rules to apply. This would not be the case at a trust 10-year anniversary.

Summary

Planning using the Rysaffe principle can yield IHT savings on discretionary trusts at a 10-year anniversary, and on any ‘exits’ between these anniversaries.

Potential tax savings should be balanced against the additional costs of administering multiple settlements, such as those associated with trust registration and reporting requirements.