SolvedIHTM20153 | Life Policies: trusts of life policies: policy settled on its own trusts: life interest in favour of a beneficiary other than the settlor
From HM Revenue & Customs · Inheritance Tax Manual
If
the only property settled is a policy on the life of the settlor, and
a beneficiary other than the settlor is given a life interest, and
there is no clear indication that the beneficiary is not to receive any income produced during the settlor’s lifetime
the beneficiary should be regarded as having an interest in possession (IHTM16061) in the policy.
Under English law a beneficiary has an interest in possession in a policy if they have
a vested defeasible (IHTM16066) interest in possession, for example
an absolute interest in possession under a revocable appointment
an absolute interest in possession in default of the exercise of a power of appointment in favour of someone else
an absolute interest in possession defeasible if they fail to survive a given event or on the occurrence of a given event.