IHTM20160 - Life Policies: trusts of life policies: policy settled on other trusts

If

  • the policy is settled by reference to the trusts of other property, and
  • the settlor takes the first life interest under those trusts, and
  • the trusts of the policy refer to its maturity on the death of the deceased

the settlor should not be regarded as entitled to an interest in possession (IIP) (IHTM16061). Although, if they are expressly given a life interest in any money that arises during their lifetime the settlor should be regarded as being entitled to an IIP.

However, if

  • the policy is settled by reference to the trusts of other property, and
  • the settlor takes the first life interest under those trusts, and
  • the trusts of the policy refer only to any money arising under the policy

the settlor should be regarded as entitled to an interest in possession unless the settlement indicates that they were not to enjoy any moneys to arise during their lifetime.

Reference may be made to Child’s Trustee Co v IRC [1960] I Ch 534 and Re Midwood’s Settlement [1968] Ch 238.