An insurance policy was taken out by two shareholders in a company. The insurance policy was assigned to a Trust, which is a standard template document. The life assured is Shareholder Y.
The Trust is poorly drafted, but essentially says:
- If Shareholder Y dies whilst working for the company, then Shareholder X receives the proceeds outright
- If Shareholder Y dies having already left the company, then Shareholder Y receives the proceeds.
The admin provisions are very basic.
Shareholders X and Y have fallen out. Shareholder X has left the company. Shareholder Y is still with the company. If Shareholder Y died then the proceeds would pay out to the ex-Shareholder X.
My concerns are that there isn’t an outright beneficial owner so we can’t do an Assignment and also the Trustees don’t have an express power to transfer to a new Trust so they can’t declare the policy to be held on the terms of a new trust for Shareholder Y.
Does anyone have any thoughts on how best to deal with this so that Shareholder X is no longer linked to the Policy and it pays out to Shareholder Y (or family) even if death occurs whilst Shareholder Y still works in the business?
Could the two shareholders agree to end the Trust in favour of Y and then Y assigns to a new trust created by Y?