According to Legal and general’s data only 6-8% its policies are written in-trust, leading to a call to all its advisers that their clients could be liable for inheritance tax that could be easily avoided. The IHT threshold in the UK is currently £325,000, which could easily be surpassed especially given the constant increases in house prices.
In normal situations, the pay-out from an insurance policy forms part of a legal estate and therefore subject to inheritance tax implications.by simply writing the policy in-trust, the lump sum pay-out goes directly to the beneficiaries and will not form part of the sum leading up to the £325000 threshold.
L&G also noted that according to the Office for National Statistics, 12% of the UK population is living together as unmarried couples, but according to UK tax law they don’t have the same terms. For these 12%, assets such as protection policies can be counted towards their estate and thus push them over the inheritance tax boundary.
Mark Holweger, M.D at Legal & General Insurance said that life insurance policies written in-trust is a good move for family planning for many customers, but yet only a few people actually do it.
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