Q&As

The settlor of a life insurance trust wishes to terminate the trust and have the policy transferred to them so that the proceeds of the policy will form part of their estate on death. Is this possible and, if so, how can it be achieved?

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Produced in partnership with Lynne Counsell of 9 Stone Buildings
Published on LexisPSL on 27/03/2020

The following Private Client Q&A produced in partnership with Lynne Counsell of 9 Stone Buildings provides comprehensive and up to date legal information covering:

  • The settlor of a life insurance trust wishes to terminate the trust and have the policy transferred to them so that the proceeds of the policy will form part of their estate on death. Is this possible and, if so, how can it be achieved?
  • Life insurance policies
  • Policies written in trust
  • Alteration or termination of the trust

The settlor of a life insurance trust wishes to terminate the trust and have the policy transferred to them so that the proceeds of the policy will form part of their estate on death. Is this possible and, if so, how can it be achieved?

Life insurance policies

There are two main types of life insurance policies:

  1. whole of life—which pays out the proceeds no matter how long a person lives. The object of such a policy is not to provide dependants with income, but rather they are used for tax planning or to provide an inheritance for specified persons

  2. term insurance—which pays out a lump sum payment or income to dependants if a person dies within the period specified. The object of term insurance is to provide for living expenses for dependants after death or, for example, to pay off a mortgage or tax liabilities

Policies written in trust

Either type of policy can be written in trust. This can be an absolute trust with a specified beneficiary or beneficiaries or a discretionary trust with a number of potential beneficiaries. A trust deed will be entered into between the settlor and the trustee(s) specifying the terms of the trust. The settlor’s only responsibility thereafter will be to pay the insurance premiums.

There are advantages in creating a life insurance policy in trust, including that:

  1. the value of the

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