Arancini Limited is an Italian restaurant in south Wales with an outstanding reputation for its food. Managing Director, Giuseppe Donatello, plans to expand Arancini’s empire by opening a deli and bakery. The shop next door has just become vacant and presents Giuseppe with an ideal opportunity to expand the company.
To achieve this the company needs to borrow £800,000 from the bank.
The bank insists on a Life Insurance policy on Giuseppe’s life, as he is the key person, to protect the loan should he die. Arancini Limited takes out a £800,000 policy over 10 years (matching the amount and term of the loan) on Giuseppe.
The policy is designed to pay out £800,000 if Giuseppe dies within the next 10 years. The policy proceeds can be paid direct to Arancini Limited or it can be assigned to the bank.
Because Arancini Limited owns the life policy on a ‘life of another’ basis, there is no need for Trust documents to be completed. In the event of a claim, the money would be paid direct to Arancini Limited or the bank, therefore it’s not treated as a benefit in kind for Giuseppe.