LOAN TRUST WILL

The first spouse to die gives £275,000 (or prevailing Nil Rate Band) to a loan trust which then lends on the assets to the survivor. [These assets can be in the form of property or other illiquid assets.] This scheme is well established and is not affected by the new pre-owned assets tax.

Why instruct a ‘Loan Trust Will’?
Simple Nil Rate Band planning could leave the surviving spouse in a difficult financial position with not enough capital to generate the income they require. The solution is for each spouse to establish a Nil Rate Band Discretionary Trust which allows for the surviving spouse to gain access to funds if necessary. An amount equal to the Nil Rate Band on death is placed in a trust fund and income is paid to the surviving spouse. The spouse is also entitled to whatever capital is needed out of the trust.

Joint assets
Often the largest asset owned is the family home. Husbands and wives are usually, but not always, "joint tenants". Joint assets pass directly to the surviving spouse and do not pass under the Will. These joint assets cannot be used to fund the Discretionary Trust Fund. However, where the property is held as "tenants in common" either party may make a gift in a Will of his or her share of the property. It is therefore worthwhile considering "severing" the joint tenancy in the house, and each party giving his or her share in the house to the children with the right for the surviving spouse to live in the property until his or her death. Although the property would still be owned jointly with your spouse, the significant difference is that on the death of the first spouse the 50% share owned by them can then be used towards satisfying the Nil Rate Band Discretionary Trusts.

An advisor will be able to illustrate how this works more fully. For personal advice about loan trust wills, ask at www.ihtsaver.co.uk