Estate Distribution and Gift and Loan Trust

Hi all,

Deceased left a homemade Will which gave a ‘sum equal to the IHT threshold, including any transferred threshold’ to her 6 children in equal shares. If the value of the Estate is more than the available threshold, the remainder is to be split between 5 charities.

Deceased had a Stirling Investment Bond, which was a Gift and Loan Trust. Value at death was approx£70k. The initial loan element was £46,000. The Executors have waived the right to repay the loan to the estate, but of course is treated as an asset for IHT purposes. No IHT due, value of estate is over £950k which is the amount of available allowances/threshold. Charities likely to benefit.

Question is - when distributing the Estate, as executors have waived loan element, does the amount the non-exempt beneficiaries (children of deceased) are entitled to reduce by the £46,000, therefore leaving £904,000 available? Any guidance would be appreciated.

Abby Young
Carter Bells LLP

On what authority did the executors waive repayment of the loan?

It seems to me that unless they have authority in the will, or the waiver was authorised by the beneficiaries, the executors are liable to restore the estate from their own funds.

The charities are unlikely to have been able to approve the waiver without Charity Commission approval and, if authorised by the children, will likely be a transfer of value by them for IHT purposes.

Paul Saunders FCIB TEP

Independent Trust Consultant

Providing support and advice to fellow professionals

It would be useful to know on what basis the executors concluded that they were allowed to waive the debt owed to them by the trust. Doing so would reduce the value of the estate and, consequently, the amount available to the beneficiaries of the estate. It sounds as though none of the beneficiaries consented to this, which makes me wonder why the executors considered that they could it.

Paul Davidoff
New Quadrant Partners