Fixed Loan Trust

For Investment Bond

The Fixed Loan Trust enables your clients to achieve inheritance tax (IHT) savings over time while allowing for continued access to their original capital. Any investment growth is outside of their estate from day one and held for specific, named beneficiaries. Optimum IHT savings can be made where loan withdrawals are taken and spent by your client, because the outstanding loan amount will reduce over time until the whole amount has been repaid.

Key benefits

  • Achieve IHT savings over time.
  • Gives clients access to their original capital.
  • Any investment growth held outside client's taxable estate from day one.
  • Joint or single settlements can be made.
  • Available in conjunction with the Investment Bond.
  • Not suitable for clients who require control and flexibility.
  • Ability to create an absolute (bare) trust.

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Key details

Eligibility
  • The settlor(s) must be 18 years or over and of full mental capacity.
  • We will not normally accept a trust created under a power of attorney.
  • Joint or single settlements available.
  • Existing investments can't be used to establish the Loan Trust, because the client lends a cash sum to the trustees who then invest it.
Features
  • Freezes a settlor's potential inheritance tax (IHT) liability in respect of the investment amount.
  • Ensures that any growth on the trust fund is outside the settlor's taxable estate.
  • Allows the settlor access to the original capital but not to any growth of the investment amount.
Inheritance tax (IHT)
  • No IHT charge on creation of the Trust.
  • On the settlor's death any loan balance outstanding will form part of the settlor's taxable estate for IHT purposes.
  • Any investment growth will be outside of the settlor's taxable estate from day one and can pass to the trust beneficiaries free of any immediate liability to IHT.
  • The settlor's IHT liability will gradually reduce where repayments are made and spent by the settlor as income, or gifted within the settlor's IHT annual exemption.
Loan repayments
  • Loan repayments can be made in regular instalments to provide the settlor with income or made as and when required.
  • Once the loan is repaid, the settlor has no further access to the trust fund.
  • If no loan repayments are made, the settlor's IHT liability in respect of the amount used to establish the Loan Trust is frozen at its initial value.
  • Any loan balance outstanding on the settlor's death will potentially be liable to IHT.
  • Further loans can be made.
  • Should the settlor decide to waive part or all of the outstanding loan at a later date, this will be treated as a potentially exempt transfer for IHT purposes.
IHT reporting
  • There is no requirement for IHT reporting.

Key documents

Declaration and loan agreement (PDF)

Important notes for applications (PDF)

See all our trust Fixed Loan Trust documents in one place, including forms, guides and brochures.

View all product literature 

Other information you need

  • The Fixed Loan Trust is suitable for clients:
    • whose estate is likely to be liable to IHT on death, even if maximum use is made of exemptions, reliefs and the nil rate band
    • who are unable or unwilling to make outright gifts as they need (or may need) access to their original capital
    • who have a lump sum available for investment
    • who are willing to forego access to future growth on their investment
    • who want any investment growth to fall outside their taxable estate from day one
    • who are willing to decide now who would benefit from the amount invested and accept that they will not be able to change their decision at a later date
    • who are content that adult beneficiaries could choose to direct the trustees how the funds should be invested and may call for payment of the trust fund at any time.

    Not for your client?

    Take a look at our other trust options

    • The Fixed Loan Trust is an effective estate-planning solution for clients who wish to achieve IHT savings over time and wish to have continued access to their original capital.
    • As the trust is established on an absolute basis, there are no reporting obligations or ongoing IHT charges to consider.
    • The investment will be made by the trustees of the  Loan Trust.
    • The Trust is designed for use with the Investment Bond

    View fund factsheets, fund prices and fund performance 

    • The Loan Trust is not subject to any charges.
    • Please see the Investment Bond for charges in relation to the bond.

    Important notice

    Please note that charges, terms and limits may change. We may change the selection of funds that we make available. There may be restrictions on the amount that can be invested in certain funds. Please contact us for details of any restrictions that apply. Tax treatment depends on the individual circumstances of your client and may be subject to change in the future.

  • Before you apply

    Before proceeding to the application stage you should ensure that your client wishes to set up a Loan Trust (creating fixed trust interests), which is on an absolute basis.

    Should they wish to establish the trust on a discretionary basis, please look at our Flexible Loan Trust

    Please also ensure your client has read the important notes for applications (PDF)

    The application stages (new investment)

    Step 1
    Step 2
    • Trustees complete the bond application form as the applicants.
    • The trustees can invest in the Investment Bond (PDF)

    The following items should accompany the application:

    • cheque for investment amount (can be drawn on the settlor(s) bank account)
    • confirmation of verification of identity of the settlor(s) and all additional trustees
    • copy of illustration.
    Step 3

    Policy documents will be issued to the trustees.

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