Life Insurance by a trust for its trustee

[Rahul Bagaria]

Can a trust take a life insurance policy for its trustee.What will be the tax impact on the trust and its trustee at the time of maturity and what will be the tax treatment for payment of premium.

[CA UMA KOTHARI]

First see the Trust deed- whether it permit to pay for LIP of trustee? What type of trust is this? What type of trustees are, for whom you want to take policy on a/c of trust? Are they traustee in real sense or just executives of trust but nomimated as trustee as well? What are purpose of policy? What will be sum assured,annula premium, tenure and maturaty value etc.? Do you think that your query is full and complete and can be replied in discussion forum? we hope you take things in proper perspective CA Dev and Uma Kothari

[Surender Gupta]

Yes, indeed, the purpose and nature limitations under trust deed would help to solve your issue. Assuming trust deed is permitting such policies, than treatment may be same as in case of ordinary business entity.

AI Summary

Trust-held life insurance for a trustee: tax treatment follows ordinary business-entity principles, subject to trust-deed limits. Whether a trust may procure a life insurance policy for its trustee turns on the trust deed's authority and purpose limitations, the nature and status of the trustees, and policy particulars; if permitted, tax consequences are to be assessed on principles akin to those for ordinary business entities, focusing on premium characterisation and the tax treatment of maturity proceeds for the trust or trustee.