A life assurance policy was created and placed into a simple fixed interest (ie not discretionary) trust many years ago. The settlor (with beneficiaries in agreement) wishes to alter the beneficiaries from the two adult children equally to just one. Is there a way of doing so that is IHT efficient, or is the trust irreversibly fixed? Can this be done now during the settlor’s lifetime, or can the beneficiary disclaim or use a Deed of Variation on the settlor’s death, for example, without creating a PET to the other? Thank you
Easiest way is for the child giving up their interest to assign their interest in the trust to their sibling. It would be a PET but presumably extremely low value unless the settlor is in poor health.
You can’t use a DoV as the policy isn’t in the estate.
Thank you. The settlor is 80 and in reasonable health, how are PETs valued in this instance? eg 5 or 10% of the value. However, wouldn’t the PET be from the adult child beneficiary (in his 50s) to the other? Would the PET trigger and fail on the settlor’s death within 7 years or how would that work please?
Yes, the adult child giving up the interest would be making the PET, not the settlor. Hopefully the value of the PET would be irrelevant but term policies are typically valued at very low values unless the insured (here, the settlor) is ill.