IHTM20154 - Life Policies: trusts of life policies: policy settled on its own trusts: examples (England, Wales and Northern Ireland)
The following 8 examples apply to England, Wales and Northern Ireland.
Example 1
If Sandra settles a policy on her life
for the benefit of Alex for life with remainder to Brian -
Alex has an interest in possession.
Example 2
If Sandra settles a policy on her life
for the benefit of Alex and if this fails, for Brian -
Alex has a defeasible interest in possession.
Example 3
If Sandra settles a policy on her life
for the benefit of such of Alex, Brian and Carol as Sandra appoints and in default for Dennis -
Dennis has a defeasible interest in possession unless S31 Trustee Act 1925, or S32 of the Trustee Act (NI) 1958 in Northern Ireland, applies and Dennis is an infant in which case Dennis does not have an interest in possession until he reaches the age of majority or marries.
Example 4
If Sandra settles a policy on her life
for the benefit of Alex and if this fails, for Sandra -
Alex has an interest in possession (but Alex dies before Sandra the ‘reverter to settlor’ (IHTM16121) exemption will apply).
Example 5
If Sandra settles a policy on her life
for the benefit of such of Alex, Brian and Carol as survive Sandra and, if none, for the benefit of the last to die and the trust carries the intermediate income -
Alex, Brian and Carol have contingent interests until the death of Sandra and have interests in possession unless S31 Trustee Act, or S32 of the Trustee Act (NI) 1958 in Northern Ireland, applies and any is an infant.
Example 6
If Sandra settles a policy on her life
for the benefit of such of Alex, Brian and Carol as survive Sandra and, if none, for the benefit of the last to die and a trust for accumulation of any income arising before the Sandra’s death has to be implied -
no-one has an interest in possession during the Sandra’s lifetime unless only one of Alex, Brian and Carol is alive in which case there is only one beneficiary.
Example 7
If Sandra settles a policy on her life
for the benefit of such of Alex, Brian and Carol as survive Sandra or attain the age of 21 and, if none, then for the benefit of the last to die and the trust carries the intermediate income
IHTA84/S71 applies and, if the Family Law Reform Act 1969 applies, S31 Trustee Act, or S32 of the Trustee Act (NI) 1958 in Northern Ireland, would apply until a beneficiary attained the age of 18 when they would have an interest in possession.
Example 8
If Sandra settles a policy on her life
for the benefit of such of the children (unnamed) of Sandra as survive her and, if none, for the benefit of the last to die, and Sandra has at least one child -
any adult child would have an interest in possession provided the contingent interest could be construed as carrying the intermediate income and no trust for accumulation had to be implied - see Child’s Trustee Co v IRC [1960] I Ch 534.