By James Kenward; Independent Financial Adviser
As more families fall within the inheritance tax (IHT) net, many are asking how best to plan, not just to reduce the bill, but to make things easier for loved ones left behind.
One option to consider as part of a broader IHT strategy is whole-of-life insurance, written in trust. This can provide a lump sum on death, outside your estate for IT purposes: With IHT due within six months of death-and interest charged at 4% above base rate after that, this payout can help avoid the need to sell assets or borrow to cover the bill.
While insurance doesn’t necessarily reduce the IHT liability itself, it can provide crucial liquidity. For families with wealth tied up in property or investments, knowing the tax bill is covered can bring real peace of mind. Importantly, the policy doesn’t have to cover the entire liability. Some people choose to insure just a proportion of the expected IHT to ease the burden.
Pensions, premiums and tax efficiency
With changes on the horizon to pension rules and inheritance tax. there may be an opportunity to use tax-efficient pension withdrawals to fund insurance premiums.
For example, taking pension income within your personal allowance or drawing tax-free cash to pay for a life insurance policy can be an effective way to convert taxable assets into tax-free protection for your family.
Plan holistically
If you’re concerned about the impact of IHT or want to explore how upcoming budget changes might affect your estate, we’re here to help.
Insurance is one tool among many. We can also help you explore:
- Lifetime gifting
- Pension and ISA drawdown strategies
- Trusts and estate planning
- Regular reviews
To talk through your options in a relaxed, no-pressure chat, call 0117 3636 212 or email office@haroldstephens.co.uk
50 High Street, Westbury on Trym, Bristol BS9 3DZ.
haroldstephens.co.uk
