Gift and Loan Arrangement Flexible Interest in Possession Trust Excluding Settlor as Beneficiary Except in Respect of a Loan

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1 Gift and Loan Arrangement Flexible Interest in Possession Trust Excluding Settlor as Beneficiary Except in Respect of a Loan Please read the notes prior to completion. The forms should not be used for Pension Policies. The Gift and Loan Arrangement is designed to allow payment of the policy proceeds to the Trustees without grant of probate/letters of administration/confirmation. In the Arrangement, the Settlor first establishes a Trust. There can be only one Settlor under the Trust. He/she makes a Loan to the Trustees who invest the money in a life assurance policy. There is no nominal gift by the Settlor to the Trust on establishment as the loan is sufficient for the purpose. All growth on the funds held within the life assurance policy will form the Gift which is payable to the beneficiaries. There is no provision for subsequent loans or gifts into the Trust. The Trustees may repay the Loan by making withdrawals from the policy, and the Settlor s estate for UK Inheritance Tax purposes will be reduced to the extent that these Loan repayments have been made by the Trustees and spent by the Settlor. The additional aims of the Arrangement are therefore to allow the Settlor to receive income and to achieve UK Inheritance Tax savings. The form is designed for use with policies issued by life assurance companies in the Abbey National Group. The Trust Form and the notes in relation to its use are for general guidance only and are based on current understanding of United Kingdom law and Inland revenue practice. No responsibility can be taken by the Abbey National Group or any company in it for the interpretation of the law or future changes in the law or practice. Tax liabilities and the ability of the Settlor in law to set up a trust are dependent on individual circumstances. We strongly recommend that you take separate legal and taxation advice prior to signature and during the lifetime of the Trust. The Declaration of Trust is a flexible interest in possession Trust which grants an interest in possession to specified default beneficiaries and either their respective estates or the survivors of such beneficiaries. The beneficiaries may be changed. The Settlor should not be a beneficiary (to help achieve the tax aims of the Trust) except in regard to repayments of the Loan. The Trust is not suitable for pension policies. Only life policies issued by companies in the Abbey National Group have been taken into account. The policy may be single or joint life, first or last death. If the insurer of a policy held by the trustees is based in the Republic of Ireland, restrictions may affect the Trust - for details please contact the insurer. The End Date as defined in Section D must be the same for all policies secured by the Trustees using the Loan. Once signed, the trust Form must be referred to the issuer for noting and return. Once returned to you, it should be kept with the Policy document and other Trust papers. COMPLETING THE DOCUMENTATION The Declaration of Trust The Settlor - Creating the Trust A1. Should be completed by the Settlor on or before the date of the Loan Agreement. The Trustees will propose for the life assurance policy and should date the proposal form after the date of the Loan Agreement. Who are the Trustees? A2. The Trustees are the recipients of the Loan by the Settlor and the future owners of the policy to be taken out by them. The Settlor is automatically a Trustee. There must be at least one Additional Trustee at A2. for the Trust to be valid, but two Additional Trustees may be nominated. Two Trustees will be required after the Settlor s death to sign the discharge form issued by the insurer. One of the Trustees must be an independent Trustee who is not a beneficiary or Settlor of the trust. Additional Trustees can be appointed at any time by the Settlor, or, if deceased, by the Trustees. All of the Trustees should be UK resident individuals, as appointment of a non-resident Trustee may have adverse UK Income Tax consequences. In addition, Trustees resident in Ireland may be excluded if the insurer is based there.

2 What is included in the Trust? B. The Loan money initially, which is then to be invested in a policy with the insurer named in Section B. The name of the insurer should be entered here. The Beneficiaries C. The first step is to identify the intended beneficiaries of the Trust ( the Default Beneficiaries ) These are the beneficiaries who will benefit if no one else is nominated by the Trustees. These Default Beneficiaries will have an interest in possession of the Trust assets. The Settlor must not be included as a Default Beneficiary. The next step is to decide who should benefit in the event of the death of a Default Beneficiary before the policy proceeds are payable. The trust allows for each Default Beneficiary s share to pass either (1) to the other Default Beneficiaries or, if they have all died, to another specified individual or (2) to the deceased Default Beneficiary s estate. This choice is made by ticking one of the boxes and in the case of (1) by nominating the specified person. You should note that survivance is determined by reference to the End Date - please see the definition in Section D. If the insurer is based in Ireland, beneficiaries who have a tax or residual connection with that country may need to be excluded. Changing the Beneficiaries The Trust form has a range of Discretionary Beneficiaries who might be substituted by the Trustees for the Default Beneficiaries in respect of the whole or part of the Trust Fund, either permanently or revocably by the Trustees. This is done by a simple signed and witnessed deed - a specimen Deed of Appointment of a Share of the Trust fund is available from the insurer. The Settlor may add additional persons to the class of Discretionary Beneficiaries by completing the space on the Trust form. The Settlor may also add to the class of Discretionary Beneficiaries at any time either by a signed written document given to the trustees while he/she is alive and/or by will. The Settlor must not be included as a Discretionary Beneficiary so as to help achieve the tax aims of the Trust. Persons can not be removed from the class of Discretionary Beneficiaries or as Default Beneficiary. Signing the Trust The Trust document must be signed by the Settlor and Additional Trustee(s) before a witness who must sign against each signature witnessed. The witness must be independent, over 18 and not a relative of the person whose signature is being witnessed. The Deed of Loan Agreement When Should the Deed be Completed? The Deed must be dated on or after the date of the Declaration of Trust but before the date of the proposal for the life assurance policy. Who are the parties to the Deed? 1. This is completed by the Settlor who is the Lender under the Loan Agreement. 2. Details of the Additional Trustees under the Declaration of Trust should be entered here. What is covered by the Deed? The Loan Agreement should specify the date of the Declaration of Trust and the amount of the Loan. How will the Loan be Repaid? C. The Deed should specify the amount to be repaid to the Settlor annually. To avoid an immediate UK Income Tax charge the amount repaid should not exceed 5% of the policy investment. Who signs the Deed? The Deed must be signed by the Settlor (the Lender) and the Additional Trustees. Each signature must be witnessed as for the Trust form.

3 Request to Trustees for Loan Repayment This document should be completed if the Lender wishes to vary the amount being repaid. It is addressed to the Trustees of the Trust and specifies the amount to be repaid immediately. The balance of the Loan must be repaid through future requests for Loan repayments. It should be borne in mind that a variation in the rate of Loan repayment could give rise to a UK Income Tax liability. PLEASE USE BLOCK CAPITALS DECLARATION OF TRUST A. This DECLARATION OF TRUST is made on 20 by the following parties, that is: 1. Name (who, excluding his/her legal personal representatives or executors, is referred to as the Settlor ) being the granter of the Loan described below which is the initial subject matter of this Declaration. 2. Name (the First Additional Trustee ) Name (the Second Additional Trustee ) B. CONSIDERING that the Settlor intends to make an interest free loan (the Loan ) to him/herself and the additional Trustees named in Section A.2 above (such persons and their successors being collectively referred to as the Trustees and that the lent monies shall be applied initially to secure in the Trustees name one or more policies of life assurance with * Insert Name of Assurance Company. *(the Policy ). C. THE Settlor and Trustees hereby declare that they shall hold the monies which comprise the Loan (if and when paid) for the trust purposes declared below. The Settlor and Trustees further declare that the lent monies and the property from time to time representing the same (the Trust Fund ) shall be held by the Trustees for the said purposes and that no further assets shall be made over by the Settlor or others to the Trustees, whether by gift or loan. D. THE Trust fund shall be held in trust as follows, that is on such trusts and with and subject to such powers and provisions dispositive or administrative in character and whether or not incorporating powers or discretions exercisable by the Trustees or other persons as the Trustees shall determine for the benefit of such one or more of the persons within the class of Discretionary Beneficiaries and in such shares as the Trustees shall during the Trust Period by deed or deeds revocable during the Trust period or irrevocable appoint at their absolute discretion, provided always that any such appointment or revocation shall not invalidate any prior payment or application of all or part of the Trust fund (whether capital or income) made in exercise of any of the powers conferred by this Declaration or by law.

4 Until and subject to and in default of such appointment, the Trustees shall hold the Trust Fund for the benefit of the following beneficiaries if alive on the End Date being the earlier of (i) the date the monies secured by the Policy become payable disregarding any early termination, surrender or variation of the terms of the Policy and any reduction in the sum assured to an amount greater than zero and (ii) the expiry of the Trust Period, and in the shares designated: Name (Share ) and Name (Share ) and Name (Share ) and provided that the share of a default beneficiary who dies before the End Date shall pass to: * the survivor(s) of such beneficiary(ies) alive on the End Date so that a share shall pass fully to survivors according to the shares of the survivors as among them if more than one and if all such beneficiaries die before the End Date, the ultimate and sole beneficiary who shall take all the said shares shall be the following person and his/her legal personal representatives or executors, that is: Name * the legal personal representatives or executors of such beneficiary who has died. (*Please tick the box applicable) provided further that notwithstanding any other provision of the Trust, under no circumstances shall the Trust Fund or any part of it (including income) be paid to or applied for the benefit of the Settlor, his or her estate or the legal personal representatives or executors of the Settlor save that the Settlor may be paid the principal amount of the loan and that the foregoing is without prejudice to the rights of the Settlor under section 551 of the Income and Corporation Taxes Act 1988, and any amendment or re-enactment of it. The beneficiaries from time to time entitled to the Trust Fund shall have interests in possession in it and a right to the income of it in accordance with their respective entitlement subject to the terms of the Trust. Trust Period means the period of 79 years from the date of this Declaration, which is the perpetuity period applicable. Discretionary Beneficiaries in whose favour an appointment by the Trustees may be made are those of the following of whom the Trustees have actual notice, excluding always the Settlor, his/her estate and the legal personal representatives or executors of the Settlor, that is:- (a) (b) (c) (d) (e) Any person(s) named or identified above as default or ultimate default beneficiary. Any child, grandchild or remoter issue of the Settlor. Any brother, sister or parent of the Settlor. Any legal spouse or former legal spouse of the Settlor and of any beneficiary under (a), (b) and (c). Any person or class of persons named or identified here.

5 (f) Any person or class of persons (i) named or identified in the settlor s will or other testamentary writing effective on his/her death and/or (ii) named or identified in any instrument executed by the settlor and intimated to the Trustees prior to the Settlor s death. Reference to a child or issue shall include an adopted or illegitimate child. All references in the Declaration to person or beneficiary shall include a legal person. E. 1. (a) There shall at all times be at least two Trustees. The power of appointing new Trustees shall vest only with the Settlor while alive and thereafter with the continuing Trustees. (b) The Settlor may remove one or more of the Trustees provided that at all times there remain at least two Trustees. Section 36(1) of the Trustee Act 1925 and Section 23 of the Trusts (Scotland) Act 1921 in regard to a Trustee being absent from the United Kingdom shall not apply. (c) A Trustee shall be removed when the Settlor sends notice of the removal in writing to the Trustee at his/her last known or usual address. The sending of the notice by recorded delivery post will be deemed due service of the removal notice. The removed Trustee shall co-operate (without expense to him/her) in any documents or consents required in order to effectively terminate his/her involvement with the Trust Fund save in respect of any default in the function of trusteeship. (d) Where the life assurance company in respect of a policy forming part of the Trust Fund is Scottish Mutual International, no person shall be appointed as Trustee who is resident and/or ordinarily resident and/or habitually resident in Ireland and if any Trustee becomes so resident, such person shall automatically cease to be a Trustee and be deemed to have been removed. The restriction in this sub clause E.1(d) stems from relevant legislation and/or practice in Ireland and may be changed in any respect in writing by the Trustees with the consent of the insurer in writing and without liability to either, in the event of a change in relevant legislation and/or practice which renders such change expedient in their sole opinion. 2. The Trustees shall act by majority provided that at least one of the Trustees in the majority is not interested in the decision save as Trustee. 3. The Trustees shall have the following specific powers, in addition to all relevant powers conferred by this Declaration and by law, that is, power to: (a) retain the Trust Fund in its present state and to invest the Trust Fund in or upon the security of such investments or property of whatsoever nature and wheresoever situated and whether producing income or not (including policies of life assurance) as the Trustees may determine as if they were the absolute owners of the Trust Fund. (b) pay or apply the whole or such part as the Trustees think fit of the capital for or towards the advancement, maintenance, education or benefit of any beneficiary having an interest in possession for the time being, to the extent of the share of that beneficiary, including the payment of Inheritance Tax, or any other tax or duty, on such terms as the Trustees think fit. (c) pay and make over capital and/or income to which a beneficiary under 18 years old is entitled to a parent or guardian of that beneficiary without being concerned to see to the application of such monies. (d) surrender a policy or part of it to the insurer for its cash surrender value or make it paid-up free from payment of future premiums. (e) sell any policy on such terms as the Trustees think fit. (f) exercise any of the options, powers and privileges conferred by a policy and to alter its terms and benefits and premiums or any of them notwithstanding that the sum assured or value may be reduced or increased. (g) appropriate all or part of the Trust Fund as the Trustees think fit in or towards the satisfaction of any interest of a beneficiary and for such purpose to place such value on any property as they see fit. (h) employ one or more of their own number or other suitable qualified person or persons for the purpose of advising on the administration of the Trust and of carrying into effect the Trust purposes and to pay such person or persons appropriate remuneration for their services. The remuneration for such services and the expenses of administration of the Trust may, if the Trustees so resolve, be paid out of the Trust Fund. Under no circumstances shall the Settlor be remunerated out of the Trust Fund for work done (or expenses) in relation to the Trust. (i) (subject to section C) borrow from the Settlor money for any purpose consistent with the Trust purposes and with or without security being granted. (j) release or restrict by deed the future exercise of any power vested in them. (k) amend or add to the administrative provisions of the Trust by deed or deeds. 4. Section 31 of the Trustee Act 1925 shall not apply to this Trust, but any income accruing in the hands of the Trustees, whether before or after the death of the Settlor, shall be paid to or applied for the benefit of those beneficiaries currently entitled to it in terms of Section D. 5. Any person may act as Trustee even though personally interested in the Trust or any transaction or decisions in relation to it, as long as one of the Trustees is not so interested save as Trustee.

6 6. The receipt of the Trustees or of any person duly appointed by them for the purpose shall be a valid discharge of any person s liability to pay money to the Trust (if he/she acts in good faith and has no notice of revocation of the agent s authority where applicable) and such person shall not be concerned to see to the application of such money. 7. In the execution of the trusts and their powers and duties none of the Trustees shall be liable for any loss to the Trust Fund arising directly or indirectly from depreciation of investments or by reason of any mistake or omission in good faith or from any other matter or thing except where such loss arises from wilful and intentional fraud and wrongdoing on the part of the Trustee sought to be made liable, or negligence (in the case of a professional Trustee). 8. The Declaration of Trusts shall be effective from the later of the date of execution and the date of the Loan agreement entered into by the Settlor and the Trustees. 9. The Trusts shall be governed by the Law of England unless the above address of the Settlor is in Scotland when the Trust shall be governed by the Law of Scotland. 10. We certify that this Declaration is an exempt instrument in terms of Category N of the Schedule to the Stamp Duty (Exempt Instruments) Regulations IN WITNESS whereof this instrument is executed as a deed and sealed (if required by Law) on the day and year first mentioned above: Signed and Delivered by the Settlor: Full Name of Witness Signed and Delivered by the Second Additional Trustee Full Name of Witness of Witness Signed and Delivered by the Second Additional Trustee Full Name of Witness of Witness LOAN AGREEMENT THIS AGREEMENT is made on 20 by the following parties, that is: 1. Name (the Lender ), and

7 2. The Lender and Name and Name (the Trustees ) CONSIDERING THAT the Lender and Trustees executed a Declaration of Trust on. 20 (the Declaration of Trust ), that the Lender desires to lend the Trustees the sum of Pounds Sterling ( ) (the Loan ) of which sum the Trustees hereby acknowledge receipt, and that the Loan is to be applied by the Trustees to secure in their name one or more policies with *( ). *Insert name of Assurance Company NOW THEREFORE the Lender and Trustees hereby agree that the Loan is subject to the following terms:- A. The Loan shall be repayable by the Trustees on written demand by the Lender, and as a whole or in such installments as are specified by the Lender. B. The Loan shall be repayable as stated in A. without interest. C. Without prejudice to the general effect of A., the Loan shall be repayable on the following basis, that is per year until written notice to some other effect by the Lender to the Trustees. D. The Loan is granted to the Trustees (and their successors) in their capacity as trustees under the Declaration of Trust and their liability in respect of the Loan shall be limited therefore to the extent from time to time of the Trust Fund as defined in the Declaration of Trust. IN WITNESS THEREOF this instrument is executed as a deed and sealed (if required by law) on the day and year first above mentioned. Signed and Delivered by the Lender/Trustee Full name () Signed and Delivered by the First Additional Trustee Full Name () Signed and Delivered by the Second Additional Trustee Full Name ()

8 SPECIMEN REQUEST TO TRUSTEES FOR LOAN REPAYMENT To Names of Trustees In accordance with the terms of the Loan Agreement dated 20 entered into by me with you and myself as trustees, I hereby request that Loan payments currently at the rate of per year cease immediately and that the amount of be paid immediately. The balance of the Loan (if any) shall remain payable on demand in terms of the Agreement. Signed (Lender) Dated Abbey National Financial and Investment Services plc, Registered Office: Abbey National House, 287 St. Vincent Street, Glasgow G2 5HN, United Kingdom. Registered in Scotland no