All shapes and sizes

Trusts of life assurance policies come in many shapes and sizes ranging from trusts of term assurance policies for family protection through to trusts of second death whole of life policies for the provision of inheritance tax (IHT) and trusts of single premium investment bonds to provide the settlor with continuing access to original capital or regular sums.

How do these trusts fare under the new proposed inheritance tax regime on trusts? Please remember that this article is based on the current provisions of the Finance (No 2) Bill 2006 which has not yet been enacted into law.

First it is important to note that there are special rules that apply to life assurance policies effected in trust before 22 March 2006. However those policies effected in trust after 21 March 2006 are not afforded any special treatment and will be subject to the full rigour of...