Pre 2006 life insurance company trusts

I’m dealing with an estate where the father of the deceased has set up a large number of trusts for various investments, generally investment bonds but also some whole of life policies. All of the trusts were set up in the 80s and 90s and generally take the form that they have an overriding power of appointment and in default of that power held as to capital and income for the four children of the settlor. At first glance they look like discretionary trusts but I’m aware that pre 2006 life insurance trusts were generally not discretionary. A couple of the trusts are Married Womens Property Act Trusts although the settlors spouse died a long time ago and they have subsequently been amended to be held as to capital and income for the four children
Am I right that as one of the default beneficiaries has now died, his share of each of those trusts is now in his estate for IHT and tax will have to be paid accordingly. Also I’m assuming an IHT100 will have to be completed for each trust (there are a lot of them)

In general, these types of trusts resulted in the default beneficiaries having an interest in possession until either the end of the trust period, or the trust fund was appointed away from them.

Even though the trust fund might produce no income, it is still aggregable with the default beneficiary’s estate for IHT purposes, with the trustees liable for the IHT on their “pot”.

Bottom line – Yes - an IHT 100 will need to be completed for each trust in question, and consideration given as to how any IHT liability might be funded.

I wonder if the settlor was made aware of the IHT issues when they were “sold” the policy trusts?

Paul Saunders FCIB TEP

Independent Trust Consultant

Providing support and advice to fellow professionals