IHTM20160 - Trusts of life policies: Policy settled on other trusts

If

• the policy is settled by reference to the trusts of other property, and
• the settlor takes the first life interest under those trusts, and
• the trusts of the policy refer to its maturity on the death of the deceased

the settlor should not be regarded as entitled to an interest in possession ( IHTM16061) in the policy unless they are expressly given a life interest in any money to arise during their lifetime.

However, if

• the policy is settled by reference to the trusts of other property, and
• the settlor takes the first life interest under those trusts, and
• the trusts of the policy refer merely to any money arising under the policy

the settlor should be regarded as entitled to an interest in possession unless the settlement gives any indication that they were not to enjoy any moneys to arise during their lifetime.

Reference may be made to Child's Trustee Co v IRC [1960] I Ch 534 and Re Midwood's Settlement [1968] Ch 238.