If a UK domiciled client’s main residence is leveraged to obtain finance which is then used to invest in QROPS (if it is material, the client does not have a pension), it is not immediately apparent to me (and I may well be missing something) that doing so would be considered a non-deductible liability for IHT purposes. I wondered if any practitioners had encountered any problems in this area or successfully navigated them?
One of the UK’s leading Trust Lawyers is of the opinion that a client who borrows money on his/her main residence to then use that money to place into a Trust ( and a QROPS is, of course, a form of Pension Trust ) is a deductible sum subject for a bare trust to the 7 year GIV period. But with a QROPS for a UK resident client, for IHT planning purposes this can be a flawed approach insofar as if death occurs post age 75 and there is still money in the QROPS then there will be a heavy tax burden on the remaining lump sum paid to the beneficiaries.
If the idea is to achieve some immediate IHT relief then one can consider the DGT approach.
I might well be missing something but a pension (including a QROPS) is neither excluded property nor relievable property. I would have thought that the loan was therefore deductible.
I don’t understand how a ‘DGT’ can give ‘immediate IHT relief’.
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