Trust Planning London Investment Bankers

Trust and Inheritance Planning for London Investment Bankers

Trust planning London investment bankers use to move deferred pay, RSUs, and carried interest out of a taxable estate early, before those assets multiply. When done well, it freezes today’s value, sidesteps the 40% US estate tax and the UK’s 40% inheritance tax, and protects the next generation in both systems.

By the Jungle Tax Cross-Border Tax Team — reviewed by a US-UK dual-qualified adviser (CPA / Enrolled Agent).

Why does an investment banker in London need trust planning at all?

A managing director in Canary Wharf often sits on assets that grow faster than any estate plan written a decade ago. Deferred compensation, restricted stock units, carried interest, and outsized cash bonuses concentrate wealth quickly. When you hold a US passport or file as a dual US-UK taxpayer, two of the most aggressive death-tax regimes in the world both want a share.

The two-country problem in one payslip

The United States taxes its citizens on worldwide assets at death, regardless of where they live. The United Kingdom now taxes long-term residents on worldwide assets too. A single banker can therefore face US estate tax and UK inheritance tax on the same portfolio. Without proper structuring, families sometimes lose more than half of an estate to combined charges and double taxation gaps.

Why trust planning London investment bankers favor starts with equity

Bank equity is the ideal asset to move early. An RSU tranche or a carried interest slice worth £500,000 today might be worth £3m at exit. Gift or sell the low-value asset into a trust now, and all future growth will escape both estates. This is the freeze principle, and it sits at the heart of every serious plan we build. You can read our full guide to the SLAT and GRAT estate freeze for a worked walkthrough.

The cost of doing nothing

Inaction is the most expensive choice a banker can make. Every year that appreciating equity stays in your own name, more growth is locked into a taxable estate that two governments can reach. A bonus reinvested and left untouched for a decade can quadruple, and the tax on that growth is entirely avoidable with early structuring. Waiting for a “quieter year” rarely pays, because the assets that matter most are the ones growing fastest right now.

What US estate and gift tax rules apply in 2026?

The One Big Beautiful Bill Act clarified and expanded the federal position. From 1 January 2026 the US estate, gift and generation-skipping transfer exemption is a permanent $15m per person, or $30m for a married couple, indexed for inflation from 2027. The top estate tax rate remains at 40% on the value above the exemption amount. The annual gift exclusion rises to $19,000 per recipient.

That headline number tempts people into complacency. A senior banker with vested equity, property in two countries,, and a growing carried-interest book can breach $15m faster than expected, and the generation-skipping tax has its own separate, non-portable exemption. The IRS estate tax rules confirm the position, and the return itself is Form 706, the federal estate tax return.

Freeze and liquidity tools American bankers use

Three structures do most of the heavy lifting for US persons. A GRAT lets you pass appreciation to heirs with little or no gift tax. An IDGT (intentionally defective grantor trust) lets you sell assets to the trust and freeze value. At the same time, you keep paying the income tax, which is itself a tax-free gift to beneficiaries. A SLAT moves assets out of your estate while your spouse retains indirect access. The trust planning London investment bankers usually choose blends these tools rather than relying on one. Sound gift planning starts with the IRS gift tax guidance because each structure uses your lifetime exemption differently.

An ILIT (irrevocable life insurance trust) deserves special mention. The estate tax is due within 9 months of death, in cash. Where wealth is locked in illiquid fund interests, an ILIT holds a life policy whose payout sits outside both estates and funds the bill without a fire sale.

Annual gifting and the wider toolkit

Small, regular gifts compound into large savings over a career. The $19,000 annual US exclusion applies per recipient, so a banker with three children can move $57,000 out of the estate each year without touching the lifetime exemption. Direct payments for school or medical fees are excluded from the count entirely. Layered alongside a GRAT or IDGT, this quiet, year-on-year gifting steadily shrinks the taxable base while the headline structures do the heavy lifting on equity and carry.

How do the new UK residence-based inheritance tax rules change the picture?

From 6 April 2025, the UK abolished domicile as the test for inheritance tax and replaced it with residence. You are now a long-term resident, exposed to UK IHT on worldwide assets, once you have been a UK tax resident for at least 10 of the previous 20 tax years. Most bankers who have built a career in London cross that line without noticing. The UK inheritance tax rules set out the basics, while HMRC explains the reform of the non-dom regime in full.

The inheritance tax “tail” that follows you home

Leaving the UK no longer cuts the cord cleanly. A long-term resident keeps worldwide assets inside IHT for a tail of between three and ten years after departure, scaling with how long you lived here. A US banker relocating to New York after 15 London years stays within the UK IHT for several more years. Planning must account for that runway.

Relevant property trust charges

UK trusts are not a free ride. Most lifetime trusts fall into the relevant property regime, which levies a 20% entry charge above the nil-rate band, a periodic charge of up to 6% every 10 years, and exit charges when assets are disposed of. For UK-facing wealth, we model these against the US benefit before committing, which is why the trust planning London investment bankers rely on has to be tested in both systems at once. Our UK non-dom and FIG regime primer covers the wider changes for internationally mobile clients.

Which cross-border traps catch US bankers in London?

Coordinating two systems is where value is won or lost. The US-UK estate and gift tax treaty exists to relieve double taxation and to decide which country taxes what, but it must be claimed correctly. The IRS estate and gift tax treaty guidance sets out how relief works, and our own US-UK estate tax treaty explainer translates it into plain English.

Foreign trust reporting and the throwback trap

When a US person is a settlor or beneficiary of a non-US trust, extensive reporting is required; Forms 3520 and 3520-A carry penalties starting at 5% of the trust value, and undistributed foreign income can be taxed under the punitive throwback rules with an interest charge on top. We break the mechanics down in our foreign trust reporting guide.

QDOT for a non-citizen spouse and the PFIC problem

The unlimited US marital deduction does not apply where your spouse is not a US citizen, a common position in London. A qualified domestic trust, or QDOT, preserves the deferral until the survivor’s death. The QDOT statute at 26 U.S. Code § 2056A sets the conditions, and our practical QDOT for a non-citizen spouse guide walks through them. Watch too for passive foreign investment companies inside a trust, since UK funds and OEICs are usually PFICs that trigger punitive US tax and separate filings.

A London case study: freezing carried interest before it grows

Consider a private equity principal, we will call Daniel, a US citizen resident in London for 14 years. Daniel held a carried interest projected to pay out around £6m at fund exit, plus £1.2m of vested bank RSUs and a £2.5m Kensington home. Left alone, that estate faced US estate tax above the exemption and full UK inheritance tax as a long-term resident, with a real risk of double taxation on the same assets.

We sold his carry into an IDGT while its value was low, freezing roughly £6m of future growth outside both estates. A SLAT captured surplus bonus cash for his UK-citizen wife, and an ILIT held £3m of life cover to fund any residual bill in cash. The trust planning London investment bankers like Daniel adopt does not avoid every charge. Still, here it removed an estimated £2.4m of combined future tax while keeping the family’s access intact. Coordinating the treaty position and the Form 3520 reporting kept the whole structure compliant on both sides of the Atlantic.

The lesson from Daniel’s case is timing, not complexity. Each tool he used is well established, but the saving came from acting while the carry was worth £6m on paper rather than £6m in the bank. Had he waited until exit, the same structures would have carried a large gift tax cost and far less benefit. Reviewing his plan at every fund milestone keeps it aligned as the numbers and the rules in both countries continue to change.

Work with Jungle Tax

Jungle Tax builds dual-compliant estate and trust structures for bankers, fund principals and senior professionals across London. We are Accountants for Creatives and cross-border specialists who speak both tax codes fluently, so nothing falls through the cracks of the treaty. Email hello@jungletax.co.uk, call 0333 880 7974, or visit jungletax.co.uk to start a confidential review before your next vesting date.