Discretionary Loan Trust
Discussion
Looking for some info on these setups. One is operating in my family for my grandfathers estate. He is survived by my grandmother, and there is a loan of approx 350k to her from the trust.
My take on these arrangements are that they:
Protect you from any inflation in value of the assets in trust for IHT purposes (wondering if their house is included in this?)
Used to provide a way of transferring the IHT allowance, which I don't think happened when the loan was setup, but does now.
Just wondering if anyone can offer a synopsis of them, and validate my understanding? Finding the info online quite confusing,
My take on these arrangements are that they:
Protect you from any inflation in value of the assets in trust for IHT purposes (wondering if their house is included in this?)
Used to provide a way of transferring the IHT allowance, which I don't think happened when the loan was setup, but does now.
Just wondering if anyone can offer a synopsis of them, and validate my understanding? Finding the info online quite confusing,
Pheo,
It depends what the underlying assets are, but yes - you'd like to think they'd keep ahead of inflation! Yes, the DLT is used to protect against IHT - but if the total value of your grandfather's (transferable) estate to your grandmother is 'just' £350,000, then you'd have to wonder if it'd be worth it in this case.
It depends what the underlying assets are, but yes - you'd like to think they'd keep ahead of inflation! Yes, the DLT is used to protect against IHT - but if the total value of your grandfather's (transferable) estate to your grandmother is 'just' £350,000, then you'd have to wonder if it'd be worth it in this case.
Ginge R said:
Pheo,
It depends what the underlying assets are, but yes - you'd like to think they'd keep ahead of inflation! Yes, the DLT is used to protect against IHT - but if the total value of your grandfather's (transferable) estate to your grandmother is 'just' £350,000, then you'd have to wonder if it'd be worth it in this case.
This is what we are trying to work out - its coming up to ten years, so queue a £4k tax liability. Hence my mother is rather worried the trust isn't a good idea. Although having mentioned this to the posh solicitors who set it up, they said there would be a tax liability of an additional £127k in IHT - but I've literally no idea how they've worked it out.It depends what the underlying assets are, but yes - you'd like to think they'd keep ahead of inflation! Yes, the DLT is used to protect against IHT - but if the total value of your grandfather's (transferable) estate to your grandmother is 'just' £350,000, then you'd have to wonder if it'd be worth it in this case.
As it was setup in 2006, at the time the IHT allowance transfer didn't exist, hence it being setup. Now we are trying to ascertain a) why it'd cost £127k in additional IHT and b) whether it is worth continuing.
However, I should say that the £350k is "just" the loan back to my grandmother. And I've no idea what this is at the moment.
I believe that as a "remoter issue" I am a beneficiary of the trust. So as a result, I believe I can ask the trustees / solicitors for the accounts. I may do this as a next step!
Glad I got the gist of it right though, thanks for confirming!
Pheo,
Trusts can be hugely complicated things, the file to set this up could be the thick end of six inches thick. In your shoes, I'd take objective professional advice from an independent perspective to determine if a) it was set up properly and b) to confirm nothing happened which has compromised it in the meantime which could have been avoided.
Trusts can be hugely complicated things, the file to set this up could be the thick end of six inches thick. In your shoes, I'd take objective professional advice from an independent perspective to determine if a) it was set up properly and b) to confirm nothing happened which has compromised it in the meantime which could have been avoided.
Ginge R said:
Pheo,
Trusts can be hugely complicated things, the file to set this up could be the thick end of six inches thick. In your shoes, I'd take objective professional advice from an independent perspective to determine if a) it was set up properly and b) to confirm nothing happened which has compromised it in the meantime which could have been avoided.
Definitely agree... Just trying to get my heads around it first. And also work out what kind of professional to approach - do we trust the solicitors who set this up in the first place? And if not, is an IFA qualified to review it!Trusts can be hugely complicated things, the file to set this up could be the thick end of six inches thick. In your shoes, I'd take objective professional advice from an independent perspective to determine if a) it was set up properly and b) to confirm nothing happened which has compromised it in the meantime which could have been avoided.
I think the first port of call would be a meeting with the existing solicitors, if they can't adequately explain the issues then you could get a second opinion from another solicitor specialising in this area, not an IFA.
If, after this, you wish to make a complaint about the original solicitor then you'd need to contact the Solicitors Regulation Authority, or, failing that, the Legal Ombudsman. Hopefully, it won't come to that!
If, after this, you wish to make a complaint about the original solicitor then you'd need to contact the Solicitors Regulation Authority, or, failing that, the Legal Ombudsman. Hopefully, it won't come to that!
Pheo said:
Definitely agree... Just trying to get my heads around it first. And also work out what kind of professional to approach - do we trust the solicitors who set this up in the first place? And if not, is an IFA qualified to review it!
Pheo,In the most abstract of terms, an IFA could advise on the suitability of the particular trust in regards to matching the client's needs to the particular type of trust and on the investments contained therein. A solicitor would be instrumental in making sure it fitted in around any other assets, wishes etc and that the legal aspects were observed. I think you need to first though, establish the facts to see if there is any blame at all. There might not be, it might be that it was set up perfectly professionally and that if a bad decision was made, it was done by the settlor - the person starting the trust, despite the advice. Another solicitor could advise on the best route to redress if the solicitor or another adviser was at fault. As said, hopefully it won't come to that.
With all arrangements of this type it's worth bearing in mind that unless you have long and profitable relationship with the advisor the facts of life say,
Or as I might put it, if YOU can't understand what they are recommending, don't do it. Because as time moves on you probably won't be able to understand whether it is working or not working.
- He gets his fee for setting the thing up and running it, not for the eventual investment outcome
- His notes written at the time will almost certainly say that he has ticked all the boxes.
Or as I might put it, if YOU can't understand what they are recommending, don't do it. Because as time moves on you probably won't be able to understand whether it is working or not working.
Are you sure it is a loan to her?
Was the trust in your late grandfather's will? If so I assume that his nil rate band entered the trust (in terms of value) and the excess is hers absolutely.
When I first ready this I assumed (too early for me to read things properly!) it was a loan from her to the trust.
What did your late grandfather's will say?
Was the trust in your late grandfather's will? If so I assume that his nil rate band entered the trust (in terms of value) and the excess is hers absolutely.
When I first ready this I assumed (too early for me to read things properly!) it was a loan from her to the trust.
What did your late grandfather's will say?
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