Inheritance Tax (IHT) is a complex and often daunting subject for many individuals and families. In recent years, the government has seen an uptick in IHT receipts, with figures reaching £7.5 billion for the tax year 2023/24 and likely to increase further ...
Inheritance Tax remains a significant concern for many!
This reality leaves many grappling with how to manage their estates effectively to protect their beneficiaries from the potential repercussions. One strategic approach to address the impact of Inheritance Tax is through writing life insurance policies in trust.
This method not only safeguards the proceeds from the life insurance policy from becoming part of the estate, but it also provides immediate liquidity to beneficiaries upon the policyholder's death.
By ensuring that the life insurance payout is held in trust, individuals can help their heirs cover any potential IHT liability, thereby easing the financial strain that can accompany the loss of a loved one!
The recent Autumn Budget outlined changes to the IHT regime, affecting both UK-domiciled and non-domiciled individuals (non-doms). These changes underscore the importance of careful tax planning, as even family farms and small businesses that benefit from agricultural property relief (APR) or business property relief (BPR) are now facing reforms that will significantly alter how these assets are treated concerning Inheritance Tax.
These reforms are set to take effect from April 2026 and will tighten the reliefs available to family businesses and farmers, highlighting the necessity for proactive estate management strategies. Writing life insurance in trust can effectively mitigate the consequences of IHT for a number of reasons.
Firstly, the proceeds can be distributed directly to beneficiaries without passing through the deceased's estate, which is beneficial in terms of tax implications. This approach ensures that funds are readily available, allowing beneficiaries to pay any immediate costs associated with the estate or IHT without having to liquidate other valuable assets, which may not be practical or desirable.
Secondly, those considering writing their life insurance policy in trust should ensure that the trust is established correctly. Engaging with legal professionals to draft the trust deed is essential, as a well-structured trust will provide clarity in its terms and facilitate the seamless distribution of funds, ultimately fulfilling the policyholder's intentions.
"Inheritance Tax remains a significant concern for many!"
However, strategies such as writing life insurance policies in trust can provide assurance that beneficiaries are financially safeguarded against unexpected tax liabilities. With ongoing changes in tax legislation, taking proactive measures today will secure the financial future of loved ones and ensure that hard-earned legacies are preserved for generations to come.
By exploring options with your tax advisor, individuals can navigate the complexities of Inheritance Tax with confidence and clarity.
Until next time ...
HELEN BEAUMONT
Would you like to know more?
If anything I've written in this blog post resonates with you and you'd like to discover more about Inheritance Tax, life insurance and trusts, it may be a great idea to give me a call on 01908 774323 and let's see how I can help you.
Helen brings the personal tax planning experience of the top 20 tax companies to Essendon. Formerly of MacIntyre Hudson (with 45 offices nationwide), Helen worked at Chancery for more than 10 years before joining Essendon as the personal tax specialist.
Tax Planning can make a considerable difference to your tax liability. Helen has specialist knowledge and experience in tax planning and uses every opportunity to minimise your tax bill is utilised. By analysing your investments, income, profit and expenditures, Helen will provide strategic tax planning expertise that could offer significant savings, whilst delivering clear, honest advice and guidance.
When Helen is not at Essendon she spends time with her young son and likes going on long walks with the family dog.
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