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Discretionary Loan Trust

A Discretionary Loan Trust, in contrast to the Discretionary Gift Trust, is an ideal way to establish effective UK Inheritance Tax (IHT) planning but without giving up the ability to enjoy access to your capital if and when you need it.

What is a Loan Trust?
Suitable for individuals seeking to do some IHT planning but who do not want to give away their capital, the Loan Trust allows the Settlor to lend an amount of capital to Trustees. The Trustees then invest the loan. The Settlor can demand repayment of the loan at any time and repayments are usually made by way of regular withdrawals. Any investment earnings on the Trust assets belong to the Trustees and are automatically outside of the Settlor's estate for UK IHT tax purposes.

Main features

  • Suitable where the Settlor is not ready to make a gift of capital but it is an effective start to inheritance tax planning.
  • The Settlor has full access to their capital at any time.
  • The Settlor has the flexibility to start and stop loan repayments.
  • The loan repayments will come back into the client's estate and can be spent or gifted within annual allowances to reduce the Settlor's estate. You

might use this Trust if...

  • You wish to start inheritance planning that will help to mitigate IHT liability on your death.
  • You may need to have access to your capital at some time in the foreseeable future.
  • You may wish to have a regular income from the Trust, either to spend or gift.

International Tax Planning Guide


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