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Overview
Provides clients with unrestricted access to the original capital invested, with future investment growth being outside of the client’s estate for IHT– no discretion to change beneficiaries.
Quick facts
- For use with the Collective Investment Bond.
- Available in English and Scottish Law.
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This is a trust which your client, the settlor, creates by lending money to their trustees to invest rather than giving it away.
- The loan is repayable to your client on demand, giving them flexibility for the future, and can be repaid to them on an occasional basis, or by regular repayments.
- The loan remains within your client’s estate for inheritance tax (IHT), whilst any growth on the trustee’s investment is made outside the estate.
- The settlor chooses their trustees. They can appoint themselves as a trust. However, it is recommended that there is at least one other trustee in addition to themselves.
- When the trust is established, the settlor names their beneficiaries and their share of the trust fund. This cannot be changed later.
Deeper dive
Lending money to a trust opens opportunities for both flexibility and inheritance tax planning.
Watch this spotlight session to see how this trust could benefit your clients.
Suitability
This trust can be suitable for inheritance tax (IHT) planning as it allows the settlor to achieve growth on their capital outside of their estate. However, the loan made by the settlor remains within their taxable estate.
The loan can be drawn on as lump sums or as a regular payment. This could allow the settlor to retain full access to their capital whilst achieving IHT efficiency on the growth. The settlor also has the ability to waive their rights to the loan at a later date – this is treated as a gift.
The trust is not suitable for clients who wish to make an immediate gift of capital which will leave their estate.
The settlor names the beneficiaries and the share each will receive - this cannot be changed later. This type of trust might be suitable where the settlor wishes to ensure that individuals will benefit from the trust.