Paying your IHT bill via life assurance

Now that personal pensions are going to be included in your estate for inheritance tax purposes after April 2027, a lot more people will be sadly subject to Inheritance Tax.

Many people would love to gift large amounts of money to their children, but would lose their financial security in later life by doing so.

One option is to insure the problem. Inheritance Tax (IHT) is payable on second death if you are a married couple. Therefore you can take out a joint life, second death life insurance policy, which will pay the tax due on second death.

For example, a couple aged 70 and 69 would pay a premium of £343 a month until second death occurred and this would pay out £200,000. The second to die would need to live for a further 49 years before they had paid more in premiums than the amount paid out.

This figure is a guaranteed premium, you should NEVER opt for reviewable premiums.

The policy would need to be in trust or the £200,000 would be added to your estate, making the bill higher.

Life Assurance for IHT for single/unmarried people is usually not cost effective, the premiums are only competitive on second death policies.

The £200,000 would be payable to your children, even if there was no IHT bill.

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