Joint Settlor Loan Trusts

Trusts Discussion
1

A couple jointly settled a discretionary loan trust for £200,000.

Wife died in 2022. Husband died in 2024. Value of policy at his death was £251,000. no withdrawals taken.

The class of beneficiaries in the trust deed did not include either of the Settlors’ spouses but did include Settlors’ widow or widower or surviving civil partner.

What value do members think should be included in the IHT account for the value of the trust? Assumption is that the husband, being one of the original settlors and becoming within the class of beneficiaries on wife’s death, brings the whole value of the trust within his estate.

This is also a case where wife’s will left husband a right to occupy the house. Does the fact that her half share is owned by her trustees mean that a discount can be claimed against his share?

Michael McCabe

2

When a loan trust is set up on a joint basis, the loan normally passes by survivorship to the surviving spouse as a spousal exempt transfer.
The outstanding loan would therefore be in husband’s estate.
The value for IHT purposes, in this case, is the outstanding loan of £200,000 which needs to be added to his estate.