Q&As

Will a life policy that includes critical illness cover, that is settled into trust, be treated as a settlor interested trust due to the settlor potentially benefitting from the critical illness cover?

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Published on LexisPSL on 31/08/2016

The following Private Client Q&A provides comprehensive and up to date legal information covering:

  • Will a life policy that includes critical illness cover, that is settled into trust, be treated as a settlor interested trust due to the settlor potentially benefitting from the critical illness cover?
  • Life insurance trusts
  • Gifts with reservation of benefit
  • Income tax

Life insurance trusts

A life insurance trust is often created so that the policy proceeds do not form part of the deceased's estate, or so that the proceeds can be obtained ahead of the grant of representation to the life assured's estate. See Practice Note: Creation of trusts—life insurance trusts.

Creation of a life insurance trusts can involve either an assignment of an insurance policy together with a declaration of trust or the creation of a settlement containing an express assignment of the policy. Where a settlement is created containing an express assignment of the policy, the usual structure is:

  1. the insurance policy is assigned to a trust

  2. the terms on which the trustees are to hold the trust property are set out

  3. the trustees are given overriding powers

  4. there is an ultimate trust

Gifts wi

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