Term loan from settlement


(mcutler) #1

I have a client who wants to give a substantial sum to his son for a house deposit.

For long-term IHT mitigation and estate planning, father will make the gift to a discretionary settlement, which will lend the son the money, interest-free.

I would normally make the loan repayable to the trustees on demand, but I have heard reports of mortgage lenders who are unhappy to accept the uncertainty inherent in that arrangement.

I therefore propose to make the loan repayable on demand, but not during the term of the mortgage.

Does that give rise to any technical problem I have not spotted?

Michael Cutler

Colemans Solicitors LLP


(andrew.goodman) #2

You will presumably need to take into account that many people now remortgage their property every 2-5 years so the term will need to apply to subsequent mortgages as well.

Andrew Goodman
Osborne Clarke LLP


(mcutler) #3

Thank you Andrew, I will bear that in mind.

Michael Cutler

Colemans Solicitors LLP


(jack harper) #4

Thank you Andrew, I will bear that in mind.

Michael Cutler

Colemans Solicitors LLP

Previous Replies

You will presumably need to take into account that many people now remortgage their property every 2-5 years so the term will need to apply to subsequent mortgages as well.

Andrew Goodman

Osborne Clarke LLP


(jack harper) #5

Interest free demand loan not repayable within fixed or indefinite term has an NPV of less than amount lent and is a transfer of value by trustees

Jack Harper


(mcutler) #6

Jack

Many thanks. Does that apply even if the settlement follows the Kessler precedents, so includes the following power?

The Trustees may lend trust money to an Income Beneficiary. The loan may be interest free and unsecured, or on such terms as the Trustees think fit. The Trustees may charge Trust Property as security for any debts or obligations of an Income Beneficiary.

Regards

Michael Cutler
Colemans Solicitors LLP