Many years ago, a whole life policy was assigned to a discretionary trust. The policy contained an “increase option” allowing the policyholder to increase the cover every few years (within limits) without medical evidence by effecting new policies. Four such new policies have been issued over the years. The 1st two were issued in the names of the trustees. The 3rd & 4th were issued in the name of the life assured.
The trust deed refers only to the assignment of the original policy but, as the additional policies were issued as a result of the exercise of an option under that original policy, I would have expected that each of the additional policies should also have been issued to the trustees.
Any views, please🤔. Thank you!
(FWIW, the policy was a Sun Life Flexible Cover Plan - a unit linked low cost WoL)
Hello there, ex Sun Life in house Lawyer here! Yes, if the subsequent policies were issued under an option attaching to the original policy then as an asset of the trust the subsequent policies are also trust assets and should have been issued to the trustees.
Unless there is a very unusual wording in the original trust , which I am happy to look at if you would like.
Hi Bob - thank you very much - very helpful. The only relevant clause in the (widely drafted) discretionary trust reads:
1. THE SETTLOR HEREBY ASSIGNS unto the Original Trustees all that policy particulars of which are set out in the Schedule hereto and the monies assured thereby and all other monies which may become payable in respect of the policy and the full benefit thereof (hereinafter called “the Policy”) to hold the same unto the Original Trustees upon the trusts hereinafter declared concerning the same
(and the schedule simply lists the insurer, policy number and sum assured).
Since the additional increase policies are issued as a result of an option in the original policy, it seems to me that they are:
“other monies which may become payable in respect of the policy…”
so should have been issued to the trustees.
Very many thanks for your input - I’ll take this up with Aviva who now administer this.
That wording is ringing some long dormant bells! (I joined the Sun Life Legal Department in the middle 80s). Yes, I am absolutely sure those policies should have been issued to the trustees (unless some other amendment was made to the trust - but that was extremely rare, most settlors used the ‘bog standard’ trust form unamended).
The only other thing I would mention is that those trusts were ‘interest in possession’ trusts rather than ‘discretionary’ trusts in strictly technical iht terms (although they were ‘discretionary’ in that they had a power of appointment amongst a range of potential beneficiaries.
Thanks again Bob - really appreciate your expertise! Really great to have access to experts via this forum.
I’m familiar with the old IIP/RTS trusts frequently used for insurance policies but can confirm that this trust used a solicitor’s draft and is discretionary. I’ll pursue things with Aviva.
Thanks for the further clarification. It was a long time ago so pleased excuse my foggy memory! However, the solicitor drafted wording (or at least that para) is very similar to that in the standard trust documents we used to offer policyholders. So, I would just reiterate your view that any further policies should have been issued to the trustees.
Although I must say that a Discretionary Trust (in the pure IHT sense) was a very rare beast at least in those days.
Yes, if the subsequent policies were issued under an option attaching to the original policy then as an asset of the trust the subsequent policies are also trust assets and should have been issued to the trustees.
