Where a life policy is issued in respect of an insurance and an annuity is purchased on the life of the insured and the benefit of the policy is vested in a person other than the purchaser of the annuity, that purchaser is treated as having made a transfer of value by a disposition made at the time when the value of the policy became so vested1. The transaction can qualify as a potentially exempt transfer (see I3.311–I3.318) and the date of the transfer is the date the benefit of the policy became vested in another person2. As it is the purchase of the annuity that is the key to the transaction, it is irrelevant how long the purchaser of the annuity retained it; it is also irrelevant whether it is the purchaser of the annuity or the donee who took out the policy.
Exclusion for associated operations
This provision does not apply if it can be shown that the purchase of the annuity and the making (or varying or substitution)
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