| Originally devised as a tax on the super-rich, inheritance | | | | Another answer could be life assurance, which |
| tax (IHT) is threatening more and more ordinary | | | | provides a tax-free cash sum on death, capable of |
| households in the UK. Indeed, over the last five years | | | | paying the IHT bill. For those who are married or in a |
| the estimated revenue from this tax has increased by | | | | joint civil partnership, taking out a joint-life second death |
| 50% to annually yield £3billion into the HM Revenue & | | | | policy would be the solution, as their estate is not |
| Customs coffers. It seems that in the future death will | | | | subject to IHT on the first death. However, it is |
| no longer be a valid reason to not pay tax for the | | | | essential that this life insurance is written into trust, |
| majority of us. The chancellor will be pursuing 40% of | | | | otherwise it will be taxed as part of the taxable estate |
| your estate over the £300,000 threshold after your | | | | - so rather than reducing the tax liability it will increase it. |
| demise. | | | | Part of the planning challenge for this solution is being |
| There is no shortage of financial advice on how to | | | | certain that you will expire before your policy does. |
| mitigate your IHT liability. That is because rising house | | | | There is no point having a sum assured to meet your |
| prices combined with the government’s refusal to | | | | tax liability if you outlive the policy. As a result, many |
| increase the nil-rate threshold in line with house price | | | | would consider a whole-of-life life insurance product as |
| inflation means that this pernicious tax is now within the | | | | the best alternative to the second death policy. This |
| reach of many ordinary, base rate taxpayers: not just | | | | type of UK life insurance product pays out upon death |
| the super rich, as originally intended. | | | | and not after a fixed period. However, premiums tend |
| Ways to help reduce your liability include reducing the | | | | to be higher with whole-of-life policies and can |
| size of your estate by using trusts, although the HMRC | | | | increase significantly over the period of the insurance. |
| has been quick to close the loopholes over the last | | | | Inheritance planning is very important and, before taking |
| few years. Under certain conditions you can give your | | | | out any policy, it is important that you compare life |
| assets away, although if done within seven years of | | | | insurance products, as the premiums will differ |
| your death, this may ultimately not reduce your tax | | | | depending upon the cover and the company. In any |
| liability, and there are other complications that may | | | | case, get professional independent financial advice |
| nullify this charitable way of distributing your worldly | | | | before committing to any life insurance purchase. |
| goods. | | | | |