IHT 2027 Pension Changes: Using JLSD Term Policy vs Alternatives?

Bostonerimus1

https://forums.moneysavingexpert.com/discussion/comment/82037106#Comment_82037106

I'm thinking about some similar issues and have been gifting to family members for several years now, but the "irrational exuberance" of the stock markets is continually defeating my goal of reducing my net worth. I'm always grateful to have such problems! But some life insurance in trust might help my heirs to pay the IHT bill, so for context what would be the cost of your premiums for whole life of 600k coverage at age 60? I'm guessing several thousand pounds a year, and the term insurance for 20 years etc. would be a fraction of that. If you are making large gifts with the goal to get the estate to below 1M then I like the term approach. Maybe give away 100k per year post 60 and if you live an average lifespan you should have transferred most of the estate without IHT being an issue. Of course growth and changes in the rules will have to be factored in, but it's a start.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/82036326#Comment_82036326

Thanks for the link.

In a previous thread there was a link to Govt info on the subject. As usual there was some ambiguity as to the exact meaning, but 'Aberdeen Advisor' is clear on the topic of mitigation of double tax on some inherited pensions.

However the advice note highlights again the increased complexity for the PR/Executor brought about by this new legislation. For sure some estates that would have been DIY for the Executor in the past, will most likely now need some professional help, especially if there are disputes where the pension and estate beneficiaries are different. This part stood out for me.

 The PRs can settle the IHT bill from the free estate, allowing them to apply for probate immediately. If a pension beneficiary is not a beneficiary of the estate, the PRs will have a right to a reimbursement from the beneficiary for IHT relating to their pension death benefits.

Could be some interesting discussions………….

JamTomorrow

https://forums.moneysavingexpert.com/discussion/comment/82037171#Comment_82037171

Thanks for the warning on provider consolidation and sluggish trust payouts as a vital real-world data point. It highlights that even when money is technically "outside the estate," administrative delays can still stall the cash flow when your family actually needs it.

JamTomorrow

https://forums.moneysavingexpert.com/discussion/comment/82037183#Comment_82037183

Agreed. Whole of Life makes sense if you have an permanently illiquid estate, but for a temporary risk like mine, the numbers don't add up when the kids can just sell from an equity ETF to fund the IHT.

As for drawing down to the 40% tax bracket, I want to keep this strictly rule-based so I don't make emotional decisions based on short-term market movements.

My plan is to set some firm guardrails based on our total estate value and how our equity portfolio is performing. If the estate crosses £X, and the bucket 3 equity engine ia above £y, then I will trigger the automatic drawdown up to £100k.

The plan for that surplus cash will change over time:

• In the early years: Use it to fully max out our own ISAs, or just spend it on lifestyle :)
• In later years: Shift to a regular gifting routine using the "normal expenditure from income" rules. That way we can cleanly fund SIPPs or JISAs for grandchildren and get the capital out of the IHT net immediately.

JamTomorrow

https://forums.moneysavingexpert.com/discussion/comment/82037187#Comment_82037187

So with the broker I was talk ing to this week the initial WOL quote for £600k for 2 healthy non smoker 50 year olds was £400/month. At ~£5k/year I'm out so I explored term insurance and for 25 years through to age 75 it was ~£65/month.

Bostonerimus1

https://forums.moneysavingexpert.com/discussion/comment/82037424#Comment_82037424

Yeah, whole life is a serious expense, term is a rounding error on your budget. If you have a solid plan to reduce your estate through gifting from age 60 to 75 or 80 you might have a fairly large income tax bill, but that's inevitable, and your heirs will get a payout to pay the IHT if you die early and if you reach 75/80 any IHT bill should be quite small if the gifting went well.

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/82037413#Comment_82037413

Have to say very impressed at your estate planning excercise and the detailed almost forensic level of analysis you are bringing to bear on the subject. Pretty much at the level of a Chartered Financial Planner I would think.

artyboy

following this one with interest. And especially with respect to potential double tax relief on inherited pensions, which certainly makes me a bit less unhappy at the changes (will need to read up on this when I'm feeling more awake).

Suspect it won't help with RNRB tapering for estates over £2m, but if we're in that position by the time both Mrs Arty and I have popped our clogs then we'll have done a pretty rubbish job.

RNRB might be moot for us in any case, latest wheeze I'm thinking is that rather than owning in our later years, we rent property, to further liquidate and divest assets.

Bostonerimus1

The IHT/Income tax situation seems to be evolving. One aspect of the IHT allowances that I find a bit unfair is that if you don't have any children to leave money to you lose the IHT free housing amounts and if you are single you don't get the spousal advantages either.

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/82038763#Comment_82038763

UK IHT is especially harsh for singletons with a few bob. There are no easy mitigation options other than removing oneself from the jurisdiction entirely. The USA federal death duty threshold of $15 million per individual is incredibly generous by comparison.