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Loan Write offs in Discretionary Trusts

Loan Write offs in Discretionary Trusts

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I have a number of clients who have set up discretionary will trusts and have assets invested into these trusts using the nil rate band. A number of the beneficiaries have taken loans out of these trusts with the knowledge of the trustees and properly registered as a loan. If these loans were deemed to be written off is there a tax consequence for the beneficiary such as the loan being treated as income on year of write off and taxed at the beneficiaries marginal rate. Please advise

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By pauld
07th May 2014 17:25

could you run that by me again?

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By Montrose
07th May 2014 17:46

Discretionary trusts loan forgiveness

This is shorthand for saying that the trustees are making a capital advance to the respective beneficiaries of an amount equal to the loan forgiven. Provided the value of the trust funds {including the loans prior to forgiving them] is less than the nil rate band at the date of the advance, there should be no exit charge for IHT purposes, but watch the knock on effect on subequent ten year charges.

Just a philosophical question-how could the beneficiaries have taken out loans without the knowledge of the trustees?

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