A smarter way to reduce Inheritance Tax planning using the Rysaffe principle

Inheritance Tax (IHT) remains a significant concern for many clients, especially those with larger or more complex estates. While exemptions and reliefs help, advisers find they often aren’t enough on their own. More advisers now use protection-based solutions and trust planning to provide liquidity and manage future IHT liabilities more effectively.

Why this matters for IHT planning

Under current UK IHT rules:

• Each discretionary trust created on a different day counts as a separate settlement.
• Each separate settlement has its own nil-rate band (NRB), currently £325,000.¹
• This allows clients to shelter more value from IHT by spreading assets across multiple trusts.

Discretionary trusts face periodic charges every 10 years, with a maximum rate of 6% on any value above the NRB. Exit charges of up to 6% can also apply when assets leave the trust.

If advisers place multiple policies or assets into one discretionary trust, the total value may exceed the NRB at the 10-year anniversary, triggering unnecessary IHT charges.

Using protection solutions more efficiently

Life insurance plays a key role in IHT planning by providing liquidity to pay future tax bills. Whole of life policies usually support this because they pay out on death, aligning with IHT exposure.

However, whole of life policies often involve significant cumulative premiums, which increase the trust’s value quickly. Placing these premiums in one trust risks breaching the NRB, especially at the ten-year charge point.

This is where advisers find the Rysaffe principle valuable.

Applying the Rysaffe principle in practice

By placing multiple smaller life insurance policies into separate discretionary trusts, each created on a different day, advisers can:

• Make sure each trust counts as an independent settlement.
• Let each trust use its own NRB.
• Reduce the chances of periodic and exit IHT charges.
• Maximise overall IHT efficiency for clients.

This strategy works especially well with protection-based planning, where advisers already write policies in trust as part of wider estate planning.

Does Rysaffe work better for whole of life or joint life term?

The answer is both work with Rysaffe. Both whole of life and joint life second event term policies can support IHT planning. However, advisers usually associate the Rysaffe principle with whole of life policies because of their long-term nature and cumulative premium impact.

That said, the principle focuses on trust structuring, not the type of insurance. Where advisers use multiple policies - no matter the type - careful timing and trust creation can materially improve tax outcomes.

Rysaffe: a smarter way to reduce IHT exposure

The Rysaffe principle provides advisers with a well-established, legitimate way to help clients reduce IHT exposure by maximising the use of the NRB through structured discretionary trust planning.

Used correctly, advisers can lower unnecessary tax charges, improve trust efficiency, and boost the effectiveness of protection solutions within an overall estate strategy.

Important information

This information has not been approved for use with customers and is based on Aviva's interpretation of current law and legislation, and our understanding of HM Revenue & Customs (HMRC) practice as at 6 April 2026. It is provided for general information purposes only and should not be relied upon in place of legal or other professional advice. Both the law and HMRC practice will change from time to time and our interpretation may be subject to challenge by HMRC or other regulatory body. Aviva cannot act as legal adviser for you or your clients. You should always seek appropriate legal or other professional advice.

¹ Source: GOV.UK, Inheritance Tax - thresholds, Published 26 November 2025. All content is available under the Open Government Licence v3.0.