Life insurance and Inheritance Tax

2 min Read Published: 02 Dec 2017

Life insurance and Inheritance Tax

inheritance tax adviceWhen assessing the potential inheritance tax liability on your death it makes sense to consider life insurance as a method of protecting your estate from inheritance tax meaning that you can pass on more of your assets to your family.

When should you consider life insurance for inheritance tax protection?

  • if your estate exceeds your available inheritance tax nil rate band (£325,000 per person or £650,000 if you've inherited a deceased spouse's allowance) and you want to pass your estate on to someone other than your spouse
  • If you want to prevent the sale of your home or any other valuable asset to pay inheritance tax
  • If you want to ensure that any inheritance tax is paid without reducing the assets you leave to your beneficiaries
  • If you have made substantial gifts (in excess of your inheritance tax nil rate band) to friends or family in the last seven years as these are deducted from your inheritance tax allowance first in the event of your death within seven years of the gift.

What type of life insurance policy do I need to pay the inheritance tax on my estate?

  • A whole of life insurance policy could be arranged so that life cover continues throughout you life
  • The policy should be held in a trust so that the proceeds payable on death fall outside your estate and, therefore, not liable for inheritance tax themselves
  • The sum assured should be enough to pay your estimated inheritance tax liability

Other ways to avoid inheritance tax on your estate

However there are other simple steps that can be taken to reduce any inheritance tax liability. It can be a simple case of arranging your assets differently. This FREE guide to Inheritance tax contains examples of how people have reduced their inheritance tax bill and instead passed the money on to their family. It is FREE inheritance tax advice that could save you £100,000s.

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