Life Policies Flashcards
What is a relevant life plan?
Term assurance taken out by employer on life of employee
Issued under discretionary trust for the benefit of the employees chosen beneficiaries (individual or charity) - non binding nomination
Lump sum death benefit must be payable before employee reaches 75
Can include ill heath benefits
Can provide favourable tax treatment if certain legislative conditions are met
No surrender value
What is the tax treatment of a relevant life plan when paid by employer?
No income tax liability on employee
No NI liability for employer or employee
Premiums may qualify as a deductible expense for employer
Describe back to back arrangements?
Own life annuity and own life policy under trust
Transfer of value unless can show not associated
Lower of = price of annuity + first premium of life policy and sum assured
Or value of greater benefit that the policy confers
Prove not associated if using for IHT by underwriting life policy/normal terms
What are the conditions for a relevant life policy?
Sum assured must be paid as lump sum on death before 75
No surrender value
I’ll health can only apply during employment
Benefits payable to individual or charity
Discretionary trust at same time not CLT
Member can make non-binding nomination
If ceases to be an employee and pays premiums must not be beneficiary = GWR
New employer can take over premiums
Benefit of back to back?
On death annuity has no value and life policy outside estate for IHT
If in good health that have assets that can’t be gifted = house
Capital element is tax free and tax free interest element taxable
