I8.375 Life policies and annuities

IHT, trusts and estates

I8.375 Life policies and annuities

I8.375 Life policies and annuities

A minimum value is placed on a policy on a person's life or an annuity which becomes payable on a person's death, if the beneficial interest in the policy or annuity contract is the subject of a lifetime assignment for less than full consideration1.

This minimum value is the total of the premiums or other consideration paid before the transfer of value under the existing policy or contract (or one for which it was directly or indirectly substituted), less any sums previously paid to the policyholder in consideration for the surrender of any rights2. The open market value (usually, but not necessarily3, the surrender value) will apply if it is higher4.


A has paid 10 premiums of £500 each on a policy on his own life. The open market value of the policy is £4,000 and the surrender value is £3,000.

If A assigns the benefit of the policy to B gratuitously, the value for IHT purposes is £5,000.

If A sells the benefit of the policy to B for £4,000 (and satisfies all the requirements of IHTA 1984, s 105) there is no transfer of value for IHT purposes and IHTA 1984, s 167 does not apply; s 167 applies only to transfers of value, and any disposition which falls within IHTA 1984, s 10 is, by definition, not a transfer

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