The MailOnline has reported that more than half a billion pounds will be paid in Inheritance Tax every year from life assurance policies that are not placed in trust.
Former Chancellor of the Exchequer, Roy Jenkins, once said ‘Inheritance Tax is a voluntary levy paid by those who distrust their heirs more than they dislike the Inland Revenue’.
To some extent this is true and there are a number of measures that can be taken to reduce any potential Inheritance Tax liability on your estate.
As this report highlights, one very simple way could be to ensure that any life assurance is written under trust.
Not only will this ensure that any life assurance cover will not fall into your estate on death, it will also ensure that benefits are paid out promptly without the need to wait for probate.
The same principle also applies to lump sum death benefits from pension plans.
Currently if you die before age 75 and have not touched your pension plans the funds are usually tax free. However, if they are paid to a spouse they form part of their estate on second death.
Using a trust mean the tax can be avoided on second death.
For more information on this subject, please download our Estate Planning Guide here.
