Why would a key person set up an 'own life under trust' arrangement?
For protection policies only. This information is for intermediaries only. It mustn't be distributed to, or relied on by, customers.04 February 2019 Back to results
To avoid the problem of having the claim proceeds paid to the company and the uncertainty about whether they’ll be liable to corporation tax, the shareholders may prefer to enter into an arrangement outside of the business.
The key person could take out an own life policy to be held in trust for their fellow shareholders. In this event, the surviving shareholders could introduce the claim proceeds to the company as required through their directors' loan accounts. This alternative approach could be more tax efficient.
However, our business trust wouldn’t be suitable for this purpose, so a solicitor would need to draft an appropriate trust.
This information is based on our understanding of current taxation law and HM Revenue and Customs (HMRC) practice, which may change. Trusts establish legal rights and entitlements and might have material financial and tax implications for the settlor, trustees and beneficiaries. Aegon UK isn't authorised to provide legal advice, so you should take your own legal advice before setting up a trust, to make sure that it meets your clients' requirements. Our trusts have been drafted for use by UK domiciled individuals.