Protecting gifts
Gifting is a key part of legacy and inheritance tax planning. However, gifts above your clients’ nilrate band can carry an inheritance tax liability for the next seven years. If they set up a Gift Inter Vivos plan, the policy can be used to cover the inheritance tax bill on these gifts if they die within this period.
And when gifting isn’ t possible …
Sometimes clients are unable to pass on assets as gifts meaning they still may be liable for inheritance tax. An example of this is residential property, where if gifting isn’ t an option, inheritance tax liabilities will remain for life.
Since the chancellor’ s budget reveal in October, inheritance tax is back in the spotlight. Without knowing what it means, families are often left with significant bills, reducing the amount of inheritance they receive.
Fortunately, protection can be a valuable tool for navigating these issues. Let ' s explore the different ways it can be useful for your clients’ inheritance tax planning.
Futureproofing with a trust
Even if your clients don’ t have an inheritance tax problem today, it’ s important think ahead. For example, life insurance policies that aren’ t included in a trust count towards the estate. By joining 1 in 4 people who place their protection policies in trust, your clients avoid a hefty tax bill shrinking their beneficiaries’ payout.
Settling inheritance tax with protection
Although they have significant premiums,‘ Whole of Life’ polices can be a cost-effective way( compared to paying the full tax bill) of providing funds to cover the liability. Whether the client dies shortly after the cover is taken out or they live past their one hundredth birthday, the cover is available to pay the liability.
Protection has always been a great solution for inheritance tax planning and there’ s never been more support and products in the industry for advisers to make the most of.
To find out more, take a look at our‘ Guide to Gifting’ Guide to gifting | Legal & General
When a client dies, any inheritance tax may need to be paid before probate can be granted. If the bill isn’ t settled within six months, HMRC will start charging interest and assets may have to be sold to fund the bill. A protection policy in trust, outside of the estate, will provide the funds in a timely manner without having to sell any assets.
April 2025 | 21