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HMRC internal manual

Inheritance Tax Manual

Life Policies: policies with Canadian insurance companies: introduction

Under the Uniform Life Insurance Acts of the Provinces of Canada (except Quebec) the life assured under any policy issued in Canada (except Quebec) can exercise all the rights and options in the policy for their own benefit unless a beneficiary has been appointed irrevocably. In this case IHTA84/S5 (2) applies and the policy forms part of the life assured’s estate because there is normally no trust and (for this reason) no settlement.

However some policies do contain an express trust in favour of the beneficiary (which can be defeated if they die before the life assured or if the life assured exercises the rights and options for their own benefit). If a beneficiary has been nominated the policy is settled property and S5 (2) does not apply.