Features and benefits

Eligibility

  • The settlor(s) must be 18 years or over and of full mental capacity
  • We will not normally accept a trust created under a power of attorney
  • Joint or single settlements available
  • Existing investments can't be used to establish the Loan Trust, because the client lends a cash sum to the trustees who then invest it

Features

  • Freezes a settlor's potential inheritance tax (IHT) liability in respect of the investment amount
  • Ensures that any growth on the trust fund is outside the settlor's taxable estate
  • Allows the settlor access to the original capital but not to any growth of the investment amount

IHT

  • No IHT charge on creation of the Trust
  • On the settlor's death any loan balance outstanding will form part of the settlor's taxable estate for IHT purposes
  • Any investment growth will be outside of the settlor's taxable estate from day one and can pass to the trust beneficiaries free of any immediate liability to IHT
  • The settlor's IHT liability will gradually reduce where repayments are made and spent by the settlor as income, or gifted within the settlor's IHT annual exemption 

Loan repayments

  • Loan repayments can be made in regular instalments to provide the settlor with income or made as and when required
  • Once the loan is repaid, the settlor has no further access to the trust fund
  • If no loan repayments are made, the settlor's IHT liability in respect of the amount used to establish the Loan Trust is frozen at its initial value
  • Any loan balance outstanding on the settlor's death will potentially be liable to IHT
  • Further loans can be made
  • Should the settlor decide to waive part or all of the outstanding loan at a later date, this will be treated as a potentially exempt transfer for IHT purposes.

IHT reporting

  • There is no requirement for IHT reporting

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Scottish Widows Limited. Registered in England and Wales No. 3196171. Registered office in the United Kingdom at 25 Gresham Street, London EC2V 7HN. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Financial Services Register number 181655.

Scottish Widows Unit Trust Managers Limited. Registered in England and Wales No. 1629925. Registered Office in the United Kingdom at Charlton Place, Andover, Hampshire SP10 1RE. Tel: 0345 300 2244. Authorised and regulated by the Financial Conduct Authority. Financial Services Register number 122129.

HBOS Investment Fund Managers Limited, registered in England number 941082. Registered office in the United Kingdom at Trinity Road, Halifax, West Yorkshire HX1 2RG. Authorised and regulated by the Financial Conduct Authority. Financial Services Register number 119223.

Scottish Widows Bank is a trading name of Lloyds Bank plc. Registered office: 25 Gresham Street, London EC2V 7HN. Registered in England and Wales, no. 2065. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under number 119278.

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