I have been asked to look into a whole of life policy which is held on trust. The policy was written into trust in 1970 and the class of beneficiaries includes the settlor’s parents, “any person whom I may marry”, and any issue. There is no trust period stated, and the wording states that the policy is held “upon trust for the benefit of all or such one or more exclusively of the others or other of the Beneficiaries as I may from time to time … by Deed, revocable or irrevocable, or by Will appoint and failing appointment… for the benefit of my father and mother in equal shares absolutely.”
Can I check if others agree with my interpretation:
The trust ends when the settlor dies (he is the life assured);
He has a general power of appointment over this trust;
If he does not exercise this power during his lifetime (or by Will) then his parents are deemed to inherit (both have long died and so their estates would inherit).
The policy has also increased significantly in value since it was placed in trust and now exceeds the nil rate allowance and will have done for over a decade I expect. As it is a policy with a surrender value, would 10 year anniversary charges apply, even when the life assured is alive?
It is really hard to answer this without asking a lot of questions or seeing the trust document.
Certainly one must separate the terms of the trust from the terms of the policy which is the trust asset. Just because the settlor is the life assured it does not mean that the trust comes to an end on his death but that this event will likely be when the policy matures and the policy proceeds become payable to the trustees. They then hold them on the terms of the trust.
Every trust has a perpetuity period limiting its maximum life. The common law rule was a life in being plus 21 years but a trust made after the 1964 Act and before the 2009 Act could specify a fixed period of 80 years from creation. If this bamboozles you it may be that this is not the appropriate way to obtain assistance.
The policy seems to be a savings policy and it matters for income tax whether it is a qualifying or non-qualifying policy. You do not state which it is or give any clue.
For IHT it needs to be classified as being either a relevant property trust or not. The default provision sounds as if it might give the settlor’s parents each an interest in possession subject to defeasance: this would prevent 10 years charges but would mean that on the death of each parent their interest under the trust would be part of their IHT estate. That interest would not be very valuable if it could be defeated by the exercise of a power of appointment.
If the discretionary trust was operative immediately during the applicable perpetuity period in priority to the parents’ default interests (a question of construction of the document) there will have been a 10 year IHT 1980 and at every 10 years thereafter on the then open market value of the policy: as a savings policy it would be accruing a positive value over its life at least through investment growth but the trustees may enjoy a full nil rate band of tax.
The nature of the power of appointment is important. If it is a general power the trust fund will form part of the settlor’s IHT estate at death under s.5(2) IHTA. But not if it is a “settlement power”: s.47A. The latter is much more common but one must bear in mind that this trust was drafted when estate duty was in force and the drafter would have had that tax in mind not IHT. A trust pre-dating IHT can have unexpected and unwelcome IHT consequences and should have been reviewed a long time ago.
Otherwise answering to any further extent would be like a game of battleships where I have to guess at what is on your squares.
@Jack has made good points and raised good questions. I would agree that the trust does not automatically come to an end on the settlor’s death but could continue beyond then (unless the trust says otherwise). To add my twopennyworth…
I would infer that in 1970 the settlor was a young adult unlikely to buy a significant single premium policy, so the policy is likely to be a regular premium qualifying policy. If so, the policy value would be unlikely to have triggered any CTT periodic charges or IHT 10 yearly charges during the early years, though it’s possible the surrender value may be sufficient to trigger charges now.
Jack raises the question whether the parents may have had an IIP - based on your description that’s a key question - but is there a power of accumulation, or what does the trust say about income?
I fear this is a case for an experienced trust practitioner (preferably someone with estate duty experience) to read the full trust document before formal advice can be given.
Chris Jones prompts me to revisit a thought that did initially occur to me.
As he infers, the settlor was probably very young in 1970 and making his parents the default beneficiaries is significant in that context. That is unusual. Usually young lives would be chosen. Are they still alive? He may have been a wealthy or high earning bachelor seeking to provide for his parents but with inbuilt flexibility as future-proofing. All this may inform the trustees about what should be done with the money in the absence of a letter of wishes. The settlor’s family circumstance may well have changed considerably over 56 years.
So what was the precise purpose of the arrangement? Would that have any bearing on the construction of the dispositive provisions in the trust document?
I think I should clarify that I am aware of perpetuity periods and what the perpetuity period in effect at the time of the document would be; the trust deed is however a single page standard document produced by Standard Life and so, with the exception of confirming that the settlor has no ongoing beneficial interest in the proceeds of the policy (and conferring powers to borrow against the policy) the only other substantive wording is quoted in my initial query. There is no indication of when it was intended that the trust should end (although it certainly has to end before the perpetuity period expires).
The settlor was indeed in his mid 30s at the time the policy was taken out and placed in trust, and did not have children at that stage. Both parents died some time ago and so having them as default beneficiaries in lieu of any appointment is problematic.
The initial premium was modest as a result of his age and we believe payments were within his annual allowances, although this is being looked into due to the change from estate duty to IHT as Chris highlighted. The date of the trust being pre-2009 also throws up quite a few questions around the treatment of payments over time.
I note the comment regarding whether or not there is an interest in possession for the parents, however as this asset was never income producing I would not have believed this to have been the intention, although I can certainly see how the wording of the trust may be interpreted as such.
The cash in value of the trust has likely exceeded the nil rate allowance for the last 2 10 year anniversaries (but this also being investigated).
Once again, thank you both for taking the time to answer. I will see if our research can turn up any further information around the trust to try and clarify some of the many questions around construction and intention.
If any of the more experienced member of the forum has come across one of these historic policies previously I would be very interested to know how this was approached.
No gratuitous disparagement was intended on my part. (In this instance—although to my eternal shame I do have a Ph.D in this disreputable subject).
Those who respond on here can only make deductions from the actual words in the OP. We have no accurate conception of who is asking the question. It could be a random passenger on a Clapham Omnibus. I would not wish my congenitally acerbic ranting to ever deter questions from being posed on here. It really does help if the question gives us some context of the kind you have outlined.
It is always a tough gig whenever one is presented with a document requiring archeological exegesis that dates back to an era before one was either qualified or was even conceived! When I first qualified the pre-1925 property law was not yet obsolete. We really did have to contend in practice with Settled Land Act 1925 settlements, despite binding trusts for sale having long since become the modern drug of choice.
I completely understand. I have used the forum long enough to know that you can never be sure of the experience of someone posting. I just felt (for the sake of my own sense of pride) that I should clarify that I do hold that level of knowledge.
Thanks @AshleyMinott2026 and @jack Having dealt with Phoenix, this may be a fool’s errand but, FWIW, my AI system suggests:
Best evidence to seek:
Ask the current Standard Life/Phoenix record-holder for a formal historical-document search, specifically requesting:
• The exact trust precedent and edition/version used when the policy was written in 1970.
• Any specimen deed, explanatory notes, sales literature, underwriting instructions, or agent manuals covering the trust.
• The policy file, proposal form, declaration of trust, correspondence, endorsements, assignment notices, and trustee-change records.
• Names or job titles of the legal/trust technical department responsible for the precedent, if retained in departmental records.
• Confirmation whether the policy and related records have been transferred to a Phoenix Group entity or elsewhere.
Phoenix’s published material includes routes for legacy-policy contact and explains that contact details depend on the previous provider; its corporate switchboard can also route an enquiry to a named person or department. Standard Life also publishes a business-transfer contact route.
Good luck - and it would be great to hear the outcome when, eventually, you get to the bottom of this .
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