As nothing has been done the current position cannot just be analysed as a loan although the trustees no doubt have power to now make a loan.
This is a common occurrence because many wills once executed are often not looked at again until death. In the abstract the executors have failed in their duty to administer the estate properly because they should have either have sold assets to satisfy the transfer of cash to the NRB trustees, or appropriated assets in satisfaction, or charged the wife’s assets, or made a loan to her on acceptable terms including security.
One alternative is to distribute the NRB notional trust fund to her but that rather defeats its objective and, as it is doubtless too late to do a variation or s144 distribution, the TNRB on her death will surely be nil. I suggest the best course is for the wife to be advised whether she wishes to retain the NRB DT in existence so that its trust fund, constituted properly by one or more of the most practicable of the methods in paragraph 2 above, will not be aggregated with her own estate when she dies. This will in effect preserve a double NRB for her. If she can afford it, the DT can be used, e.g. after she repays part of any loan by the trustees, to make future gifts otherwise than from her free estate, so no cumulation or 7 year survival requirement or GROB risk.
This decision therefore needs to be integrated with an overall personal estate plan of hers. If the DT is retained it will need to be registered on TRS and its own tax planning considered. There is an interesting recent discussion at https://trustsdiscussionforum.co.uk/t/life-interest-will-trusts-options-for-life-tenant/19875 as to who should advise whom about what and when, bearing in mind any possible conflict and not cutting corners to accommodate a lay client’s insistence on simplification which they later change their mind about and look for someone to sue.
A full distribution to the wife from the DT may cut out eligible beneficiaries who do not benefit from her estate either in due course. The DT trustees must at least consider their competing claims. If she is a trustee, it may not be overdoing it for an independent trustee to be appointed unless (separately advised) she and any other trustee accept the risk in full. These nasty theoretical over the top possibilities which seem so remote at the time may later be exposed to the hindsight of solicitors acting for insurers and be judged by them as having been totally foreseeable.
Jack Harper