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Beginners’ Guides
Beginners’ guide to Inheritance Tax Planning
Life cover
If you don’t want to give away your assets while you’re still alive, another option is to take out life cover, which can pay out an amount equal to your estimated IHT liability on death. Make sure you write the policy in trust, so that it pays out outside your estate.
You can choose a:
- Term policy – which runs for a fixed number of years
or a
- Whole of life policy – which as the name suggests pays out when you die regardless of how long that is.
Policies written on a joint life second death basis – paying out when both of the couple are dead – can be the most cost efficient way of mitigating an IHT liability.
When choosing a whole of life plan, look for one that has no investment element – so you only pay for the life cover – not unwanted savings.* There are however some companies that offer guaranteed acceptance, regardless of the state of your health, for small amounts of cover – typically up to £15,000. You may have to pay more if your health isn’t good.
* Bear in mind that if you are in poor health or are very old you may not be able to take out a plan.
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