Ensuring Your Legacy with a Pre-Funded Trust

Chris Broome – Chartered Financial Planner

Estate planning is crucial to preserving your wealth for future generations, and a Pre-Funded Trust stands out as an exceptional tool to ensure your family’s inheritance tax (IHT) bill is managed efficiently.

By leveraging this strategy, you can ensure your estate passes on to your loved ones without unnecessary delays or financial burdens.

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Key Benefits of a Pre-Funded Trust:

1. Tax-Free Payouts to Trusts

A Pre-Funded Trust allows for tax-free payouts, meaning the funds are readily available to cover any inheritance tax due upon your passing.

This ensures your estate remains intact and can be transferred to your heirs without having to liquidate assets.

2. Interest-Free Loans for Immediate Funds

Upon your death, your children can take an interest-free loan from the trust.

This loan provides the necessary funds to pay the IHT instantly, avoiding any immediate financial strain or the need to sell valuable assets.

3. Preservation of Estate Value

With the IHT paid through the trust, there’s no loss to the estate.

Your assets remain whole, safeguarding their value for your beneficiaries.

4. No Probate Delays

The process bypasses the often lengthy probate period.

With just a death certificate, the funds are accessible, ensuring a swift settlement of the IHT and immediate transfer of your estate to your heirs.

5. No Monthly Loan Payments

The loan taken by your children to cover the IHT does not require monthly repayments.

Instead, it is repaid when the borrower (your child) passes away, ensuring no financial pressure on them during their lifetime.

6. Generational Tax Savings

The structure of the loan repayment offers substantial tax benefits.

When your children pass away, the loan is repaid from their estate, effectively saving 40% of the loan value against their IHT.

This cycle can repeat with future generations, maximising the savings and perpetuating the benefits of the initial policy.

7. Long-Term Benefits with a One-Time Cost

The true advantage of a Pre-Funded Trust is that it is funded once but benefits multiple generations.

The policy’s value multiplies over time, offering exponential benefits far beyond the initial sum assured.

In Summary

By incorporating a Pre-Funded Trust into your estate planning, you can provide your family with a robust financial safety net, ensuring that your wealth is preserved and passed down seamlessly through the generations.

This proactive approach not only protects your estate but also offers peace of mind, knowing that your loved ones are well taken care of without the burden of heavy inheritance taxes.

Next steps

If you have any questions about any of the above, or wish to discuss your long-term financial plans with us, please get in touch. Contact us

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.