{"id":4839,"date":"2016-09-22T10:35:32","date_gmt":"2016-09-22T10:35:32","guid":{"rendered":"https:\/\/simplylaw.waydevelopers.com\/england-wales\/wiki\/inheritance-tax-planning-life-insurance\/"},"modified":"2024-03-29T14:59:17","modified_gmt":"2024-03-29T14:59:17","slug":"inheritance-tax-planning-life-insurance","status":"publish","type":"guides","link":"https:\/\/simply.law\/england-wales\/guides\/inheritance-tax-planning-life-insurance\/","title":{"rendered":"Inheritance Tax Planning: Life insurance"},"content":{"rendered":"<p>Life insurance provides funds on death to meet an anticipated Inheritance Tax (IHT) liability, subject to the premiums being maintained and the policy terms being met. However, life insurance:<\/p>\n<ul>\n<li>does not avoid the IHT liability, but rather provides an investment vehicle to meet that liability;<\/li>\n<li>may not be sufficient to meet the full IHT liability (given that asset values and tax rates will change over time); and<\/li>\n<li>involves the payment of premiums which may be reviewed by the life company on a regular basis.<\/li>\n<\/ul>\n<p>The cost of life insurance depends upon the gender, age, state of health, lifestyle and personal habits (particularly smoking) of the life assured. The life insurance premiums paid by the life assured will be treated as gifts for IHT purposes, but the gifts will be exempt if they form part of the life assured\u2019s normal expenditure out of income or if they fall within the annual exemption which applies to gifts of capital.<\/p>\n<h2>Term insurance<\/h2>\n<p>A term insurance policy can be taken out to cover an anticipated IHT liability if death occurs within a specified period of time, typically seven years from the date of a gift. A term insurance policy does not provide any benefit if death occurs after the policy term has expired, and so is considerably cheaper than a whole-of-life policy.<\/p>\n<h2>Whole-of-life assurance<\/h2>\n<p>A whole-of-life policy can be taken out to cover an anticipated IHT liability whenever death occurs, and so is considerably more expensive than a term insurance policy.<\/p>\n<h2>Writing a policy in trust<\/h2>\n<p>If a life policy is not written in trust then the proceeds are paid to the personal representatives of the life assured\u2019s estate once a Grant of Representation (whether that is a Grant of Probate or a Grant of Letters of Administration) has been obtained, and will form part of the estate for IHT purposes. If, on the other hand, a life policy is written in trust then the proceeds are paid to the beneficiaries immediately on death, and will fall outside the estate for IHT purposes. The beneficiaries can then choose to lend the policy proceeds to the personal representatives of the individual\u2019s estate to pay the IHT liability. Writing life policies in trust applies to new life policies taken out as part of IHT planning, or existing life policies such as endowments or Death-in-Service benefits with an employer.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Deciding whether you need life insurance is a vital part of inheritance tax planning. Here is a quick and easy guide on what types of insurance there are.<\/p>\n","protected":false},"author":1,"featured_media":9351,"parent":0,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","format":"standard","meta":{"_acf_changed":false,"_joinchat":[],"footnotes":""},"categories":[12373],"tags":[8671,8748,11309,11310,11311],"guides-category":[],"class_list":{"0":"post-4839","1":"guides","2":"type-guides","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-inheritance-tax-issues","8":"tag-inheritance-tax","9":"tag-life-insurance","10":"tag-term-insurance","11":"tag-whole-of-life-assurance","12":"tag-writing-a-policy-in-trust"},"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v23.4 (Yoast SEO v27.4) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>A Guide to Using Life Insurance for Inheritance Tax (IHT) Planning - Simply Law England Wales<\/title>\n<meta name=\"description\" content=\"Protect your family&#039;s inheritance with life insurance for Inheritance Tax (IHT) planning. Ensure your loved ones are financially secure.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/simply.law\/england-wales\/guides\/inheritance-tax-planning-life-insurance\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Inheritance Tax Planning: Life insurance\" \/>\n<meta property=\"og:description\" content=\"Protect your family&#039;s inheritance with life insurance for Inheritance Tax (IHT) planning. 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