Trustees paying for the life cover of the settlor?

SA96

1. Settlor gifts £325,000 into an offshore bond, which is written under a discretionary trust for the benefit of his children.
2. Settlor takes out a life insurance policy until age 90 (written in trust for the benefit of his children).
3. Trustees use the 5% tax-deferred allowance on the bond to pay the premiums on the life policy. The premiums would be paid out of the trust bank account.

My understanding is that the trustees cannot use the trust funds to pay for the life cover as all of the trust funds must exclusively be used for the benefit of the beneficiaries.

But a colleague has made the point that the life cover is written in trust for the children, so they are arguing that it does benefit the trust beneficiaries. I find this argument really dubious and cannot see online resources that support this type of arrangement.

Does anyone else have any thoughts?

les_cameron

Read the deed for the premium paying trust and make sure it is allowed to settle money on other trusts and on what terms - and if it's all tickety boo crack on - if it's not see a solicitor.

SA96

@les_cameron said:
Read the deed for the premium paying trust and make sure it is allowed to settle money on other trusts and on what terms - and if it's all tickety boo crack on - if it's not see a solicitor.

Thanks Les, that's really helpful.