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Life cover for inheritance tax minimising

3 replies

Underthefloorboard · 22/05/2023 14:11

DH has death in service benefit through work. I used to when full time employee but now freelance. His job is at risk now and he’s 52. We paid off our mortgage so never needed the type of reducing cover which just pays this off. However, neither of us had clocked that life insurance is exempt from inheritance tax. DC will probably inherit over the tax free threshold thanks to living in a London terrace without mortgage etc. We will pay for proper tax advice but always good to go in armed with some knowledge. What level of life cover do we need if we want DC to have school and university fees covered in the event of one of our deaths? They are 9 and 12… And will anyone cover us at his age (52). I am mid 40s. What should we expect to pay a month. He’s prob just outside his BMI … I am substantially outside which is another reason I have been waiting to get cover once weight has dropped. At what age does the insurer stop your policy eg I can’t imagine it keeps going into your 90s etc?! Can you write off the premiums against the IHT bill if for example your policy runs out at 75 and you are no longer eligible for a new life insurance one but you’ve paid say 20k into it? Sorry for the inane questions. We have been in denial about insurance and inheritance tax.

Secondly if anyone knows the very rough percentage cost of buying a house in trust, do let me know. We think if we ever move next house would have to be in trust to stop it being swallowed up by IHT.

OP posts:
wistfullyfocused · 22/05/2023 14:51

IHT trusts don’t work that way. You can t give it away to a trust and still live in it.

No, you can’t offset life insurance against IHT. You can, and should direct any proceeds to a trust.

Term insurance as opposed to whole of life, are two very different things. You appear to be conflating the two.

Yes you can insure yourself for an amount that would cover fees.

Will your premiums be loaded (higher than standard terms)?. Yes very likely

aramox1 · 22/05/2023 20:30

You can have a policy in trust but the premiums may end up outweighing the payout in the end. Also the last 7 years of premiums before your death count as gifts so are part of the estate for iht. I have a feeling this route is no longer a great one but obviously you need a financial advisor. In the end you probably have to suck it up and expect your kids to pay IHT - it's not unreasonable imo.

wistfullyfocused · 22/05/2023 20:52

You can have a policy in trust but the premiums may end up outweighing the payout in the end

whole of life policies usually break even over 100

Also the last 7 years of premiums before your death count as gifts so are part of the estate for iht
>> not if they fall within excess income, or 3k gift allowance

I have a feeling this route is no longer a great one but obviously you need a financial advisor.
>> yes as you’re not up to speed.

In the end you probably have to suck it up and expect your kids to pay IHT - it's not unreasonable imo.
>> at least that comment is true

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