IHTM20501 - Life Policies: life policy linked with a loan and inheritance trusts: introduction

Inheritance Trusts, or Gift and Loan Trusts, were designed as a means of limiting the charge to Capital Transfer Tax by ‘freezing’ the value of a large part of the transferor’s estate and allowing any financial growth on that element to take place in the estates of intended beneficiaries free of tax. These schemes were therefore known as ‘estate freezing’ schemes.

There are two basic types, the ‘original’ scheme (IHTM20511) and the ‘reverse loan’ scheme (IHTM20521).

It was considered unreasonable for individuals to limit their estates in such artificial ways, and legislative changes were introduced to counteract them