Skandia launches limited liability loan trust

Having been told by international advisers that almost half of all trust cases written are used to mitigate IHT, Skandia has responded with the launch of its Limited Liability Loan Trust for personal trustees.

Such loan trusts are used by financial advisers as an IHT solution for freezing an IHT liability whilst maintaining access to the capital. With such a trust arrangement the individual has the ability to make an interest free loan repayable on demand, the proceeds of which are placed in a single premium investment bond written in trust for the chosen beneficiaries. Any growth in the value of the loan falls immediately outside the individual’s estate for the benefit of the beneficiaries. What’s more, there is no requirement to survive for any period of time.
 
As the interest free loan is not a gift for inheritance tax purposes there is no potential inheritance tax charge on setting up the trust. However, the value of the gift will remain inside the estate.
 
Rachael Griffin, Head of Product Law and Financial Planning at Skandia International, explains, “Being a trustee is an important decision and one where careful consideration needs to be taken to understand your obligations and liabilities. In order to provide choice to the market we believe that launching the Limited Liability Loan Trust provides clients and advisers with maximum flexibility and makes the decision on becoming a trustee easier and more straight forward.”

Under an unlimited liability loan trust arrangement, trustees are personally required to make up any shortfalls. This latest launch offers the trustee the protection of limiting their liability to the current value of the assets in the trust, rather than the value of those assets at the outset.  

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