Life Assurance and Inheritance Tax

henzerani

Hi Everyone:j
I'm new (or rather, newly registered - I've been following Martin's advice for ages) and here is my first question:

I want to arrange Life Assurance for my wife, and the sum is in excess of the Inheritance Tax level.

Martin says "If you die the life assurance forms part of your estate. This could mean you're hit with a huge whack of inheritance tax." and suggests the policy be written in trust.

I thought that I could take the policy out in my name on her life. I know it sounds emotionless but I am after all insuring myself against something that would affect me financially.

Can I do this and is it the same thing as writting in trust ? And would that mean I didn't have to pay inheritance tax on the insured amount

dunstonh

I thought that I could take the policy out in my name on her life. I know it sounds emotionless but I am after all insuring myself against something that would affect me financially.

Nothing wrong with that and its not uncommon to write a policy in the name of another.

Can I do this and is it the same thing as writting in trust ?

Yes you can do it but its not the same as putting it in trust and wouldnt achieve anything different to having a joint life plan.

And would that mean I didn't have to pay inheritance tax on the insured amount

There is no IHT to pay on first death between spouses. IHT would potentially apply on second death when the money goes to the children. That can often be avoided by use of a trust.

henzerani

Thanks. That's really helpful.:A

We're doing it this way as my wife earns a lot more than me and there'd be a bigger impact on the familly if she died. So we're wanting to insure both of us but for different amounts.


:question: are you saying that it doesn't matter whether we insure our own lives or each others for inheritance tax purposes?

:question:And does writting it in trust only help if we are wanting the money to go to our daughter rather than the surviving spouse?

Ta

dunstonh

:question: are you saying that it doesn't matter whether we insure our own lives or each others for inheritance tax purposes?

As you are married, it doesnt matter if you do joint life, single life or life of another. It has no impact on IHT in your case.

:question:And does writting it in trust only help if we are wanting the money to go to our daughter rather than the surviving spouse?

Yes. However, the surviving spouse is able to utilise the money held in trust for things like housing, clothing, holidays, education or anything that involves the children directly or indirectly. So even putting some into trust to the child can be beneficial to remove some from the potential second death estate.

henzerani

Thanks dunstonh

I feel much clearer on that.

So even putting some into trust to the child can be beneficial to remove some from the potential second death estate.[/QUOTE]

Does that mean we could elect to put part of the life cover into trust for our daughter, so as to cover the possibility of us both dying at the same time?

henzerani

Thanks dunstonh

I feel much clearer on that.

henzerani wrote: »

So even putting some into trust to the child can be beneficial to remove some from the potential second death estate.

Does that mean we could elect to put part of the life cover into trust for our daughter, so as to cover the possibility of us both dying at the same time?