Trust Loan Notes
This video explains Nil Rate Band Trusts and Trust Loan Notes and how they can protect your estate for your children and grandchildren.
How Trust loan notes work
When money is appointed out of a Trust the person who receives it can be protected from:
Going bankrupt and losing the money
Getting divorced and losing half of the money
Going into care and losing the money
Having it add to their estate causing their own beneficiaries a potentially increased inheritance tax burden
Losing benefits by the money forcing them over the benefits threshold
A loan note is issued from the Trustees to the nominated individual named within the Trust.
The amount of the gift from the Trust is written on the loan note.
The loan is only repaid from the recipient’s estate when they die.
As a result, they carry a technical ‘’debt’’ with them throughout their lives which protects them I the following ways:
If money is ‘’owed back to the Trust’’ it cannot be included in;
A bankruptcy – it must be paid back and therefore is excluded from an official receiver’s grasp
A divorce settlement – it is a debt and cannot be taken by a divorcing spouse
A Local Authority assessment – The debt must be excluded from the person entering into care’s financial assets
Debts must be paid back before any inheritance tax is due – this usually means the funds are there for the beneficiary’s own children if they are named as potential beneficiaries within the Trust meaning money that would otherwise be paid to the government is saved from being taken
It is a debt and therefore does not form part your assets that can be included when being assessed for a benefits claim
BE VERY CAREFUL THOUGH – many of these precious benefits can be lost if your executor does not really know what they are doing and just appoints the money from the Trust absolutely without any loan note meaning the good work done by the settlor (the one setting up the Trust) will be for nothing as the recipient would then be vulnerable to all the issues listed above.
We strongly advise therefore using ourselves as the Executors of your Will if there is a Trust involved either within it or as a separate entity to it.
That way you know you will have the MAXIMUM protection not just for you but, (because Trusts can last up to 125 years) also your children, grandchildren and maybe even great grandchildren as well.
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