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Insure against tax

There are several ways of reducing inheritance tax exposure, each more complicated than the last, but is insurance the easiest of the bunch?

25 June 2015

Life assurance is perhaps the easiest but most underrated way of addressing an inheritance tax (IHT) liability. The principle is that you insure yourself for the amount of inheritance tax likely to be payable, with the policy held under trust. Through this arrangement, the heirs on death receive tax-free funds for the tax bill without the need to wait for probate.

With full cover from the very first premium, those who die earlier will have had good value. For those who enjoy an average or longer lifespan, life assurance might not save anything, because the premiums over the years can amount to paying the tax in another way.

These two sides of the coin are not the whole story however. The use of life cover can work best when combined with more careful planning, as a recent case demonstrates.

Our client has assets of approximately £2.7m with a ...

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