Lowes Inheritance Guide

LOWES INHERITANCE GUIDE

7 Life assurance

What on earth does life assurance have to do with inheritance tax planning and passing on your wealth?

Life assurance has long been a popular choice as a way to pay for an inheritance tax bill. By calculating the likely tax bill faced by your children or grandchildren, you can put in place life cover for the equivalent amount, so they can use this payout to cover the tax bill. The first step to consider is whether or not you need any life assurance in place, to pay for a future inheritance tax bill. This means calculating the tax charge that would apply if you died tomorrow and thinking about how this might change in the future. With the main residence nil-rate band now in place, a shrinking amount of wealth is subjected to the 40% inheritance tax bill. In fact, from April 2020, you have been able to pass on £500,000 tax-free to the next generation, assuming you are leaving behind your main residence to direct descendants.

This means inheritance tax, in addition to putting in place life assurance to cover the tax bill, is increasingly a concern for wealthier individuals and couples - but always check to confirm your circumstances. This is where working with a Lowes Adviser can help. If you do want to put some life cover in place for the purpose, a popular option is a guaranteed whole of assurance policy. The premiums on these policies are fixed for life and unlike term assurance, they have no fixed term. When using life assurance for inheritance tax planning, the policy needs to be written in a suitable trust, to prevent any benefit from adding to your taxable estate and therefore increasing your tax bill. Life assurance can play a useful role in passing on your wealth if other options to reducing a future inheritance tax bill prove to be unsuitable. A life assurance option isn’t always simple, so make sure you seek professional advice.

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