Gift and Loan Trust

Also worth knowing

• How many loan agreements do my clients need to fill out?

  You’ll need to complete one loan agreement for each donor or settlor and one trust agreement for each application.

  So, for a joint trust, where there are two donors or settlors, then both individuals will need to complete a loan agreement. In this instance, there’ll be two loan agreements and one trust.

• Are there any restrictions around who can be a trustee?

  You’ll always need a minimum of two trustees. A donor or settlor is automatically a trustee.

  If there are two donors or settlors, for example married or civil partners, then a third trustee will need to be appointed.

• What are the steps to setting up our Gift and Loan Trust?

  Steps to setting up a Gift and Loan Trust:

  1. Your client sets up the Gift and Loan Trust with us.
  2. Your client then lends a sum of money to the trustees in accordance with the loan agreement.

   

  The trustees invest the money. This means they apply for the investment bond.

• What loan repayments can my client take?

  Your clients can take regular or ad hoc repayments from the loan. They cannot access any growth achieved within the trust as this is held for the beneficiaries. This means that once the loan’s been repaid, your client can’t receive any more payments from the trustees.

• What happens when my client dies?

  If your client dies and was the only, or last, life assured then the bond will end and income tax may need to be paid.

  Any outstanding loan will form part of your client’s estate and the executors will usually ask for the outstanding loan to be repaid. There might be a chargeable event, if the underlying bond, or any of the policies making up the bond, need to be surrendered.

  If your client has made a will, where they pass on any outstanding loan, then the bond won’t have to be surrendered.

  Where there is another life assured, the bond can continue.