I have 2 clients who are equal shareholders in a business and have a total of 6 life policies (three on each life) for £1 million each.
They want to set up pilot trusts to receive the LA benefit should they pass away. I’m not sure how to value the policies for NRB purposes for entry and periodic charges. This problem also directly impacts on how many pilot trusts should be created, i.e. one per person or one per policy.
Can anyone advise please?
Paul Dodsworth
Holistic Estate Planning Solutions Ltd
IHTA 1984 s 160 provides a general rule that the value of a life policy is its open market value which is simply the amount the policy could be sold for in the market. However, special rules for lifetime transfers for valuation of a policy of life insurance payable on death are contained in IHTA 1984 s167. Minimum valuation is equal to the amount of the premiums paid less any sum received under the policy before the transfer.
Bottom line is the value is the greater of open market value and amount of the premiums paid less any sum received under the policy before the transfer. Any market valuation can be provided by an actuary.