Compare Inheritance Tax Life Insurance Quotes from leading UK insurers including….

Compare quotes from leading UK insurers including…

                         

Inheritance Tax and Life Insurance

Inheritance Tax is levied on the estate of a deceased person following their death. A person’s estate can include their property, money, cars and other possessions, as well as the proceeds of a Life Insurance policy.

IHT won’t usually be payable if the value of the estate is below the Nil Rate Band (NRB) of £325,000 or if you leave everything above the threshold to your spouse or civil partner, or to an exempt beneficiary such as a charity.

However, if the value of your estate is more than £325,000 and the above situations don’t apply, the part of your estate above the threshold could be liable for IHT at a rate of 40%.  By writing your life insurance policy in trust the pay-out will go directly to your beneficiaries, rather than forming part of your legal estate and thus no IHT will be due.  Writing your policy in trust also means the pay-out will reach your loved ones much quicker as it bypasses probate – the legal process of sorting out a deceased person’s estate.

Inheritance Tax must be paid before your loved ones will be able to access your estate when you die and as a result, they could be forced to stump up thousands of pounds in one go.

If you know that your beneficiaries will be liable for Inheritance Tax when you die, you could take out a  Whole of Life Insurance policy to cover the full amount of the Inheritance Tax bill. Whole life insurance policies will pay out whenever you die, rather than within a specified term (as with term insurance).

Again, to avoid the proceeds of the policy incurring Inheritance Tax, your whole life insurance policy must be written in trust. Keep in mind that the premium paid for the policy will also help to reduce the value of your estate which can further reduce the amount of Inheritance Tax due when you die.