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HMRC internal manual

Inheritance Tax Manual

Life Policies: types of policy: alternative benefits policy

A policy may provide benefits to be paid on different events and it is possible to specify separate beneficiaries for each benefit. In these circumstances you should regard the benefits as separate items of property rather than different beneficial interests in one item of property (the policy). So, different beneficial interests may subsist in each of these separate benefits. See the example below.

Example

Jenny takes out an endowment policy under which a sum assured of £50,000 is payable in 25 years time or on her death before then. She puts the policy into a trust under which

  • Jenny is entitled to receive the sum assured if she is still living on the maturity date in 25 years time.
  • Jenny’s daughter is entitled to receive the sum assured if Jenny dies before then.