INHERITANCE TAX...

Not everyone is aware of inheritance tax, it important to consider this when taking out life insurance as it effects those who you leave behind.

Inheritance Tax is a tax on the estate (the property, money and possessions) of someone who’s died. There’s normally no Inheritance Tax to pay if either:
-the is below the £325,000 threshold.
-you leave everything above the £325,000 threshold to your spouse, civil partner, a charity or a community amateur sports club.

The standard Inheritance Tax rate is 40%. It’s only charged on the part of your estate that’s above the threshold.

So, who pays? If there is a will, it’s usually the executor of the will who arranges to pay the Inheritance Tax (IHT). If there isn’t a will, it’s the administrator of the estate who does this . Inheritance tax must be paid before the 6-month anniversary the persons death.

When people take out life insurance policies, it important to remember that the sum payed out will be included in their estate when they die. Which is why it is important.

One way to avoid your life insurance lump sum being included in the inheritance tax bill is to write your life insurance policy “in trust.” A trust is essentially a legal arrangement, where the trust takes ownership of certain assets. You appoint a trustee or trustees to oversee the trust. These could be family members, friends or perhaps a solicitor.

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