16 March 2006
A discretionary trust owns a substantial asset and a ten-yearly charge will become payable in the near future. The trust does not have cash — or assets that can be easily converted to cash — with which to pay the forthcoming liability. If the settlor makes a loan to the trust to enable it to pay the tax, will the loan be treated as an additional lifetime transfer by the settlor and what other tax implications might arise? For example, would the loan be a debt on the trust and reduce the liability? And are there any planning points that we should be aware of here?
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