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Bypass Trust

This page is for Professional Financial Advisers only

While pension death benefits are normally paid free of inheritance tax, (and while funds remain “inside” the pension arrangement after the death of the original member and remain outside of any potential beneficiary’s taxable estate), funds that are received by a beneficiary from the pension arrangement may become taxable to the extent that they form part of the taxable estate of a deceased “receiving beneficiary". In these circumstances a Bypass Trust can add value, flexibility and tax efficiency to the Cofunds Pension Account and the Suffolk Life MasterSIPP. This is by enabling the death benefits paid out of the pension arrangement to remain accessible to beneficiaries (via the exercise of the trustees' discretion) but without forming part of their estate for inheritance tax purposes. This can then operate to maximise the amount that passes to the next generation but without necessarily denying access to the funds for the surviving spouse/registered civil partner of the deceased.

How to apply

Important information

We do not provide guidance on the suitability of when or how to use the Draft Bypass Trusts provided. These trusts (as indicated on the face of each of the documents) are provided strictly as drafts for the consideration of the client’s legal advisers, as to which is most appropriate and suitable for the client’s needs.

If you’re applying for a new Cofunds Pension Account (CPA) on behalf of one of your clients and would also like to create a CPA Bypass Trust, simply enter the details of the trust during the online process.

Alternatively for the CPA, you can complete the Bypass Trust application form, and send a copy to us at Cofunds Limited, PO Box 1103 Chelmsford, CM99 2XY. Please ensure you keep hold of the original.

To set up a Suffolk Life Bypass Trust on a Suffolk Life MasterSIPP you can use the Bypass Trust application form. Once complete, you’ll need to send a copy of this form to Suffolk Life, 153 Princes Street, Ipswich, Suffolk, IP1 1QJ, United Kingdom. Please ensure you keep hold of the original.

For the AJ Bell Investcentre SIPP, AJ Bell provide a draft template on their website.

For the L&G Portfolio Plus pensions, their Draft Pension Death Benefits Discretionary Trust form can be found on their website.

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