The Loan Trust is the most versatile trust in the IHT planner’s toolkit, having the ability to meet present needs and future objectives. In this session, M&G’s Senior Technical Manager Neil Macleod takes a deep dive into the Loan Trust, looking at the benefits they offer for different client types, their tax treatment and how to administer the trust taking into account a client’s evolving needs and objectives.
Learning outcomes
By the end of this session, you will be able to:
Claiming your CPD
1. Andrew places £500,000 into a discretionary loan trust. Andrew has made no other gifts in the last 7 years. What are the IHT implications of this transaction?
a) There will be an entry charge of 20% on the £175,000 excess over the nil rate band because a chargeable lifetime transfer has been made
b) There will no entry charge because this is a potentially exempt transfer
c) There will be no entry charge because there is no transfer of value
2. Sam and Lisa set up a loan trust for £100,000 on the 1st January 2020. On the 17th July 2025 they ask for a loan repayment of £30,000. The trustees make a partial withdrawal across all segments to raise funds to make the loan repayment. There have no other withdrawals from the bond and no ongoing advice charge paid. What are the chargeable event implications of the withdrawal?
a) The loan repayment will not cause a chargeable event because it is a return of the original loan
b) The encashment will trigger no chargeable gain because it’s within the available tax deferred allowance
c) The encashment will trigger a chargeable gain of £5,000 at the end of the policy year
d) The encashment will trigger an immediate chargeable gain of £5,000 at the time of the withdrawal
3. A loan trust was set up on the 1st September 2016 with a loan of £500,000 from a single settlor. The trust is now coming up for its first ten year anniversary and the settlor is still alive. There have been no additions to the trust since inception and the gifts made in the seven years before the commenced were:
· A £100,000 potentially exempt transfer on the 1st Sep 2012
· A £100,000 chargeable lifetime transfer on the 1st Sep 2010
· A £100,000 chargeable lifetime transfer on the 1st Sep 2008
How much nil rate band does the trust have for the purposes of calculating the periodic charge?
a) £325,000
b) £225,000
c) £125,000
d) £25,000
1. Andrew places £500,000 into a discretionary loan trust. Andrew has made no other gifts in the last 7 years. What are the IHT implications of this transaction?
a) There will be an entry charge of 20% on the £175,000 excess over the nil rate band because a chargeable lifetime transfer has been made
b) There will no entry charge because this is a potentially exempt transfer
c) There will be no entry charge because there is no transfer of value
2. Sam and Lisa set up a loan trust for £100,000 on the 1st January 2020. On the 17th July 2025 they ask for a loan repayment of £30,000. The trustees make a partial withdrawal across all segments to raise funds to make the loan repayment. There have no other withdrawals from the bond and no ongoing advice charge paid. What are the chargeable event implications of the withdrawal?
a) The loan repayment will not cause a chargeable event because it is a return of the original loan
b) The encashment will trigger no chargeable gain because it’s within the available tax deferred allowance
c) The encashment will trigger a chargeable gain of £5,000 at the end of the policy year
d) The encashment will trigger an immediate chargeable gain of £5,000 at the time of the withdrawal
3. A loan trust was set up on the 1st September 2016 with a loan of £500,000 from a single settlor. The trust is now coming up for its first ten year anniversary and the settlor is still alive. There have been no additions to the trust since inception and the gifts made in the seven years before the commenced were:
· A £100,000 potentially exempt transfer on the 1st Sep 2012
· A £100,000 chargeable lifetime transfer on the 1st Sep 2010
· A £100,000 chargeable lifetime transfer on the 1st Sep 2008
How much nil rate band does the trust have for the purposes of calculating the periodic charge?
a) £325,000
b) £225,000
c) £125,000
d) £25,000
Before collecting your certificate, please take a moment to provide us feedback on this session, please email prudential.distribution.team@prudential.co.uk
Complete the form below and we’ll email your CPD confirmation to you. Please use the email address that you would usually use when contacting us.
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