Inheritance Tax (IHT) is payable after you die. It is paid on the value of the assets you leave behind - known as your estate. This tax (40%) is payable if your estate is valued at over £325,000 (2014/15 tax year).

It is possible to take out suitable life insurance policies that will pay out to cover the cost of any Inheritance Tax payable on the estate. This allows families to inherit the value of the estate without a tax deduction.


Why might you choose life insurance for IHT planning?

  • If you think there might be an Inheritance Tax liability to pay when you die and want your family to inherit your estate in full without it being reduced by IHT.

  • If you want to protect your home from being sold to pay the IHT bill.

  • If you’ve made gifts to friends and family in the last seven years (these gifts could still be counted towards your IHT bill).

Ideas to reduce your Inheritance Tax bill

  • Make a gift to your spouse or civil partner

    If you are married or in a civil partnership, you can leave anything you own to your spouse or civil partner. In doing so, your estate won’t have to pay Inheritance Tax on the value of the gift.

  • Give gift to family and friends

    If you gift money or other assets to a friend or family member and then live for 7 years or longer, it won't be counted in your estate for IHT when you die.

  • Leave money to charity

    You can leave money from your estate to charity free of inheritance tax. Moreover, if you leave at least 10% of your estate to charity, the inheritance tax due on the rest of your estate will be reduced.

  • Take out some life insurance

    Although life insurance won’t actually reduce your IHT bill, it could make things easier for your family. For example if you take out life insurance to cover the amount of IHT your estate is likely to be charged, your family may not then need to sell the family home or other important assets in order to pay the Inheritance Tax bill. Speak to an Endsleigh adviser for advice on using life insurance for IHT planning.

Endsleigh's qualified and experienced Financial Advisers can advise you on setting up life insurance to cover your potential Inheritance Tax liability.

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