Protect Yourself With Inheritance Tax Insurance
If you are looking for a way to limit the effects of inheritance tax on your estate, then inheritance tax insurance could be just what you need.
Using life insurance to cover your future inheritance tax is a tried and tested way of your family not paying more tax than they need to.
Ready to take the next step?
There is no need to gift money, create trusts or shelter assets, simply pay a monthly premium, and when you die a tax-free lump sum will be paid to your family to pay the inheritance tax on your estate.
How does inheritance tax insurance work?
As with any life insurance you pay a premium for a set amount of cover. Inheritance tax insurance is also known as a whole-of-life insurance policy and people have been using them for many years to protect higher value estates.
They are offered by some of the world’s biggest insurers such as L&G, Zurich, Aviva and many others.
The Process
We calculate your potential future inheritance tax bill, you decide how much of this you would like to insure, we search the entire market for you to guarantee the best value premiums.
Once the policy is in place you will need to continue to pay the premiums until you die, or the policy would be cancelled.
Call us now and we will be able to quote you in just 60 seconds. We know you don’t want the big pitch so if you prefer, we can quote you and be led by the questions you want answered, no hard sell and no sharing of data with numerous other people.
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Why Choose Executive Life for Inheritance Tax Insurance?
At Executive Life, we understand the importance of taking care of your families future. Our company life insurance policies are tailored to fit your business needs and we focus on both tax efficient as well as insurance.
We offer:
Client Reviews
Smooth process, easy to deal with and most importantly they saved me a lot of tax by switching my policy to one that could be paid for by the business.
Recently used them for relevant life and income protection. Professional and informative.
I set up shareholder protection policies for me and my business partners through Executive Life. They found us competitive quotes and the process was swift. I would highly recommend to other company directors.
Executive Life helped me find the best deal for my life insurance policy and also my income protection policy. It was very easy and the process took no time at all - I would highly recommend them!
Very happy with the service and process I went through. They explained how the income protection policy worked and how it would be tax efficient for me through my limited company.
Final Benefit of £500,000 with Inheritance Tax Insurance
Inheritance tax insurance isn’t cheap as it is guaranteed to pay out in the future, subject to the premiums being paid. It can’t be sold as an investment product but what would the return on investment be for a typical policy?
A 42-year-old, healthy male taking out a £500,000 policy would pay £393 a month for cover (quoted 2024). Therefore, should he survive until age 100 he would have paid £273,528 in gross premiums for a final benefit of £500,000. This is the equivalent to an 83% return on investment when assessing total paid vs total gained.
(Please note that a policy paid by a business would claim corporation tax back on the value of the premiums and the life assured would pay a BIK charge on the premiums paid. These figures have not been included in this calculation).
Find Out How Much You Could SaveWhat are the pros and cons of using life insurance for inheritance tax?
Inheritance tax insurance is becoming very popular in the UK as assets have ballooned over the last 10 years, however the nil-rate-band has stayed largely the same. This has pushed millions of people into the category of inheritance tax. So what are the pro’s and cons of using inheritance tax insurance?
The Cons
- The Cost – Whole of life insurance is much more expensive than a simply term assurance policy as it is guaranteed to payout in the future. Premiums will need to be paid for the rest of your life or the policy will be canceled. What might be affordable now may not be in retirement so it is essential to get the balance right between premium cost and cover. This might mean that partial cover is a better solution to reduce the effect of IHT on your estate, not eliminate them completely.
- Health Restrictions – If you have any adverse health conditions you may not be eligible for insurance of premiums might be very high. If you are a smoker for example your premium cost will be double that of a non-smoker making the policy very expensive.
The Pro’s
- Control of assets – As you will have an inheritance tax insurance policy that will cover some or part of your estates inheritance tax in the event of your death you may not need to explore other inheritance tax planning options such as making lifetime gifts. In order for a gift to qualify you would need to lose control and this might not be appropriate earlier in life.
- Return on investment – In most cases the life assured would have to pay into the policy for over 80 years to pay in more than the policy pays out. This makes it generally a great long term investment into your estate, although you will never see the benefit personally, your estate will thank you for it. As inheritance tax insurance is offered by some of the leading insurers in the world there is little risk of default and the payment is guaranteed.
Your Questions About Inheritance Tax Insurance Answered
What is inheritance tax insurance, and do I need it?
When assessing how to protect your estate from inheritance tax or reduce its effects insurance should be the first possibly to explore as it does not require losing control of the assets as it would if the funds where gifted or transferred to a trust.
Also inheritance tax insurance can prove to be a great investment for your estate as the gap between premiums paid and benefit received usually provide a good return on investment.
If your estate exceeds the current £325,000 nil-rate-band or even the jopint nil-rate-band of £650,000 then it might be worth considering inheritance tax insurance as a viable option. It will allow you to keep control of your assets while still covering inheritance tax in the process.
What are gift inter vivos policies?
Lets go back a step. You may be looking to make some lifetime gifts to family or friends or possibly even gifts to children or grandchildren for house despots or other higher value purchases.
Under UK law any gift made while you are alive would count towards your £325,000 nil-rate-band in the event of your death. However, if you survive 7 years after giving the gift, the gift does not count towards the your nil-rate-band and it as though the gift never happened.
This then leaves a period of 7 years after the gift has been given where it could be counted towards the taxable estate should the gift-giver die. Having a gift inter vivos policy would provide insurance cover to the value of the inheritance tax that might become due on this gift, should the gift-giver die before the 7 years expires.
The 7 year rule is tapered so that the inheritance tax exposure on the gift reduces as the 7 year period starts to elapse. For example,
3-4 years 32%
4-5 years 24%
5-6 years 16%
6-7 years 8%
7 years plus 0%
Due to this the gift inter vivos policy is also tapered in cover. This means that as the policy reaches its latter years the exposure to the insurer is less, which allows them to offer more competitive premiums for the over than a level term and making gift inter vivos very cost effective.
How does taper relief affect inheritance tax on gifts?
Can life insurance cover inheritance tax bills effectively?
Upon death the policy pays a lump sum into a trust, tax-free, to the beneficiaries that are specified. This is usually the family of the deceased. The money is paid tax-free and is outside of the estate, therefore avoiding probate. The policy can be accessed in a matter of days and the family or beneficiaries can then use the funds to settle the inheritance tax on the estate which can then speed up the release of the estate from probate. The end result is that HMRC get the tax due and the fancily receive their inheritance without taking a 40% hit due to inheritance tax.
As with any form of life insurance any previous or current health conditions may effect the cost of cover and in some cases mean cover may not be offered. It is therefore not a suitable solution for everybody, however should be explored and considered when considering inheritance tax planning.
Can life insurance be part of the estate for inheritance tax purposes?
How do I ensure my life insurance isn't subject to inheritance tax?
I you are unsure if you have a trust set-up with your life policy call your insurer to check. They will instantly be able to tell you and if not, can establish one for you in most cases.
Is life insurance a good option if my estate value is high?
What are the next steps?
Finding the right Inheritance Tax Insurance for you can be difficult. There are twelve primary insurers, and obtaining quotations from all of them takes time.
At Executive Life, we specialise in finding the right policy for you. We will show you quotations from every insurer in the market so you can choose the right cover for you.
We will also complete all of your application documentation over the phone and save you the hassle of multiple paper application forms and endless admin. Our team will cover all of that for you.
Ready to Protect Your Inheritance?
Our advisors are ready to help you explore Inheritance Tax Insurance options that fit your needs. Secure your future today
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