Spousal by-pass trusts are established to allow the lump sum death benefit of a pension to be paid by the scheme trustees to someone other than the deceased’s spouse or civil partner, while still giving them access to those funds. They offer certain inheritance tax benefits and are becoming increasingly popular. However changes in legislation relating to perpetuity periods (laws relating to how long it is permissible to tie up assets in a trust) have created a pitfall which in certain circumstances can invalidate the trust potentially resulting in an additional inheritance tax burden for spouses. Care needs to be taken to avoid this pitfall and Richard Monkcom, head of Druces LLP’s Private Client team explains how.