Inheritance Tax Provisions

It is not always appropriate to gift assets either directly to a beneficiary or into a Trust.

The reasons for this are as follows:

  • Concern regarding the donor’s long term financial requirements;
  • Concern regarding the readiness of the donee to receive the gift;
  • Concern regarding the potential divorce of the donee;
  • Concern regarding the costs and administration of setting up a Trust as the donee; and/or
  • Concern as to which child is the most appropriate to inherit assets.

Inheritance Tax Provision through Life Assurance is a viable means to protect the Estate and avoid a forced sale. It can also provide a useful means of diversification for an estate. There are a number of different options available here at Lycetts:

  • Death by Accident only: a sum assured equal to the potential IHT liability would be paid in the event of death as a result of an accident only. This type of policy is renewed annually at the discretion of the insurers;
  • Level Term Assurance cover is provided: in the event of death by any cause during a specified term (ten years, for example);
  • Whole of Life Assurance: a sum assured is payable on death whenever that may occur and premiums can either be short term and reviewable or long term and guaranteed; and/or
  • Gift Inter-Vivos: where a gift has been made as a Potentially Exempt Transfer (PET), Life Assurance can be taken out to provide for the potential IHT liability in the event of death during the seven years following the PET.