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Technical Briefing freezing asseT values
Neil Chadwick, technical
marketing manager, Royal
London 360°
This planning can be
particularly successful for
clients who are reluctant to
make outright gifts.
Loan repayments must be
spent or written off.
On death only the value of
the outstanding loan remains
in the lenders estate for IHT,
all growth is exempt.
Any loan repayments ‘written
off’ must be sufficiently
documented (ideally by deed)
as HMRC may require sight
of these when assessing the
estate for IHT.
Taking the heat out of IH
For clients worried by the thought of a huge inheritance tax bill, asset
freezing through the use of a loan trust can provide a useful solution.
Neil Chadwick explains how to use them to their best advantage
key poinTs To minimise inheritance
tax (IHT), individuals with
more than enough money
to see them through the
rest of their days should be
considering giving away
what they realistically do
not need.
But in the unpredictable
world in which we now
live, while a client may
take little convincing to
understand whether they
will or will not have an
IHT liability, getting them
to give something away to
reduce it may prove to be
a slightly more onerous
task for the adviser. It
would seem that unless a
client is elderly or extremely
wealthy, it is very
difficult to quantify how
much can be given away
now, while still enabling
them to maintain their
expected standard of living
in the future.
So what can be done for
those clients who find
themselves in a position
where they know that
something has to be done
to reduce their estate for
IHT but cannot afford to
give away capital at this
point in time? One solution
is asset freezing and, more
simply, loans.
Asset freezing can be a
particularly useful strategy
for the adviser, as it enables
a client to take what
could be their first steps on
the IHT planning ladder,
without having to make
large gifts or in fact any
gifts at all.
Life companies have
been offering an effective
way for clients to undertake
this type of planning
for quite a few years now,
but in previous and more
‘affluent’ – or rather ‘risktolerant’
– times, the good
old loan trust has been a
poor relation when compared
with outright gifts
and more adventurous
planning.
But in the words of legendary
darts commentator
Sid Waddell, we could be
seeing the greatest comeback
since Lazarus.
l Affording protection
So why are loan trusts such
a useful planning tool?
Quite simply, it affords
INTERNATIONAL ADVISER [www.international-adviser.com] MAy 2009
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