IHT on family property trust where one beneficiary has died

[jugglingcats]

We have an IIP trust formed in 1988 containing a property in the UK. The shares are split equally between three beneficiaries (me, my brother and my sister). My brother unfortunately passed away suddenly and left everything to his two children who were born and live in Australia.

Although my brother had lived in Australia for many years we understand there will be UK IHT to pay of approximately £70k after his nil rate band is taken into account.

We understand that the trustees are liable for the IHT and there is no way to claim this on my brother's estate in Australia. The family would not want to claim in any case as his children do not benefit from the UK property: it doesn't make money and is unlikely to be sold. It seems very unfair to hit them with a UK tax bill on a property they don't use, and they won't inherit a lot of cash from my brother.

The family here in the UK are trying to come up with a way to cover the IHT but recognise this properly somehow in the trust. We want things to be fair for all concerned and are looking for options.

One idea would be for me and my sister to pay the IHT by making a loan to the trust which could either be paid back over time or sit in the trust as a liability which is settled if/when the place is sold. Would appreciate a view if this option has any legs at all? The loan could be with or without interest - obviously the money we put in could usefully be invested elsewhere.

Thanks

[AGoodman]

Yes, you could lend the money in to pay the tax. Nothing wrong with that.