| Inheritance tax (IHT) has come in for much criticism | | | | £30,000 on his estate - you could take out a life |
| and the government has addressed these issues by | | | | insurance policy to cover the IHT bill. If Mr Green |
| raising the threshold to £325,000 (2010) - In real | | | | passed away the life policy would pay out to his |
| terms you only pay inheritance tax if your estate is | | | | estate or beneficiary to cover the IHT demand. Mr |
| valued at more than £325,000. | | | | Green would of course need to pay a premium for |
| But what if the incoming lie policy is £200,000 - | | | | the cover. |
| You have valued your estate at £300,000 this | | | | This type of life insurance product is called 'whole of |
| puts the individual under the current IHT threshold, the | | | | life' - the policy would pay a set amount on death at |
| life company pays out the £200,000 lump sum | | | | any time during the individuals life - as opposed to term |
| to the estate and this takes the value of the estate to | | | | insurance which pays out during a set term. |
| £500,000 - Do you now pay inheritance tax? | | | | What ever the circumstances if the individual has |
| The short answers is no. Life policies do not form part | | | | taken out a life policy on either whole of life or term |
| of the estate for the purposes of calculating the | | | | basis there is no inheritance tax liability. |
| individuals inheritance tax liability. | | | | As discussed the lump payment does not form part of |
| In some case the life policy will have been established | | | | the estate when calculating any IHT due to the |
| to pay the inheritance tax. | | | | revenue. |
| For example Mr Green may have an IHT liability of | | | | |