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Royal Skandia has launched a liability loan trust which can help provide access to cash while still mitigating inheritance tax liabilities.

The company said it launched the product after it conducted a poll of international advisers and found that almost half of all trust cases written by advisers are used to mitigate IHT liabilities.

A loan trust facility allows an individual to take an interest free loan from the cash in trust, repayable on demand, the proceeds of which are placed into a single premium investment bond written in trust for the chosen beneficiaries. Any growth in the value of the loan would fall outside the individual’s estate for the benefit of the beneficiaries.

Skandia said as the interest free loan is not a gift for inheritance tax purposes there is no potential inheritance tax charge on setting up the trust. However, the value of the gift will remain inside the estate.

Anyone over the age of 18, and of sound mind, can be appointed as a trustee. This trustee would automatically become the legal owner of the trust fund and will become responsible for the administration of the trust itself, including ensuring the debt is repaid. Under an unlimited liability loan trust arrangement, the trustee would also be personally required to make up any shortfalls.

However, under a limited liability loan trust, the trustee can limited their liability to the current value of the assets in the trust, rather than the value of those assets at outset.

Rachael Griffin, head of product law and financial planning at Skandia International, said: “Being a trustee is an important decision and one where careful consideration needs to be taken to understand your obligations and liabilities. In order to provide choice to the market we believe that launching the Limited Liability Loan Trust provides clients and advisers with maximum flexibility and makes the decision on becoming a trustee easier and more straight forward.”