I used contractor loan schemes for a few years, and now hoping to settle with HMRC. No problems there. Loans are promised to be interest free and will never be recalled. I have however, from reliable source, been recommend to have the loans written off and as a result pay IHT. The reason given was that loans can be recalled at any time. In my case, IHT adds ca. 34% on top of the tax bill arising from settlement.
I am now exploring options to avoid paying IHT and leaving the loans outstanding - forever if possible. But my question here is to do with death: If I die, will my left over estate be subject to the debt in the trust? The loans amount to ca. 200K and would eat up a considerable amount of what I leave behind, were the trustees to claim back what is technically owed them. I've been advised that trusts can at any time recall the loans, and this of course leaves me, and my family, exposed to additional debt - especially if I die.
Could one ask trustees to issue a letter to say they will not, ever, recall loans, and that in the event of death they would not subject my debt towards the trust to my left over estate?
Would such a letter be legally enforceable (as in, is there provision in the law that would conflict with such a letter? Would it change the status of the loan to a gift - and trigger other issues?).
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