what is a loan trust

A Basic Guide to the Loan Trust!

Do you plan to give away the assets and also you hope to seek a way to keep out of the reach of taxman for inheritance tax purposes the thought of losing the right and benefits might scare many of us. However, there are people who can’t afford to give away assets even though they have intentions to be engaged with inheritance tax planning. Here comes the role of a loan trust which offers you a suitable solution but what is a loan trust?

Before we delve into further discussion, let’s have a look at the focused points of discussion in this article:

Loan Trust

  • What is A Loan Trust?
  • Advantages and Disadvantages of A Loan Trust
  • The Bottom Line


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What is A Loan Trust?

If we focus on the name loan trust, the meaning is hidden in the term itself. A loan trust is associated with a loan and trust as well. Here is how. The trust is actually a set-up and the trustee who can be the settler is appointed. The job of the settler is to make a loan for the trust.  This loan is further invested in the investment bond with the purpose of growth. The element of growth potential in trust loans is real here.

Moreover, the inheritance tax advantage here is that the loan originally is always a part of the estate of the settler but the growth is another part that remains outside of the estate.


Are you still confused and intend to seek more about the loan trust? Get in touch with us at Accotax to get your queries answered quickly. 


Advantages and Disadvantages of A Loan Trust:

There are many loan trust advantages, the prominent ones are listed below:

  • The settler is able to retain the original loan.
  • The loan is repayable if demanded.
  • The offer of regular instalments is open for the repayment of the loan.
  • There can be the option of one single amount or occasional repayment as per an individual’s suitability.
  • If a trustee wants regular repayments, the time can be agreed on while the trust loan is set up.
  • You can enjoy tax-free repayments over twenty years, it is only possible by partially surrendering to the policy.


Reach out to Accotax and speak to one of our professionals to get to know the policies. Reach out today!


As we all know everything comes with its factors of pros and cons, and so is the case of loan trust. There are certain disadvantages that bring hesitation among people to follow the offers. Here is the detail of the disadvantages:

  • The loan trust is not suitable for everyone.
  • The growth made from the investment of the settlor does not offer any benefits to him and he loses the right to enjoy the benefits of growth at a certain level.
  • The investment growth can possibly go down at any moment which causes financial damage.
  • At the time of a settlor’s demise, if repayment is pending it will be added to his estate.
  • Once the loan is repaid completely, there are no benefits left for the settlor.


If you need any advice on inheritance tax planning or loan trust, you can always talk to our professional available at Accotax!


The Bottom Line:

Now that you have developed a better understanding of what is a loan trust, we can sum up the discussion by saying that it offers advantages to the settlor, however, the disadvantages can’t be ignored which are pretty prominent in this case. This becomes a factor of demotivation and hesitation for people to avail themselves of the opportunity and enjoy further benefits when there is no benefit gained from the investment growth.

We hope this article helped to give you a basic idea of loan trust!


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Disclaimer: This article intends to provide general information based on what is a loan trust and relevant details.

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