Passing on wealth for future generations
It is worth noting that loans are subject to a formal loan agreement and may remain outstanding for the duration of the Beneficiary’s lifetime.
The loan is an asset of the trust and a debt of the beneficiary.
On the death of the Beneficiary of the loan, their estate would repay that loan to the original trust. Remaining assets could then potentially be available for the next generation, whilst remaining outside of their estate. It is important for the Settlor to write a detailed Letter of Wishes to the Trustees at the time the Trust is set up. It should also be reviewed regularly, so that the assets of the Trust are used as the settlor intended.
The past six months have been a stark reminder of how events beyond our control can set even some of the most carefully-made plans off course. For families thinking about how they can support the next generations, both protection and flexibility need to be integral aspects of their planning.
Mark Wintle is inheritance tax specialist at WAY Investment Services
