A new report
highlighting that taxpayers in the UK will waste £448m ($720.8m)
this year due to poor inheritance tax (IHT) planing when it comes
to their life insurance policies, has relevance for intermediaries
in the industry.
Life insurance policies
are usually free of personal liability, but in certain
circumstances an individual’s payout may be subject to inheritance
tax
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In order to avoid this, the Tax Action
Report from professional advice website unbiased.co.uk, said
individuals taking out life protection specifically to provide for
their heirs need to decide either to leave the payout to
beneficiaries directly, or alternatively put these policies ‘under
trust’, thereby removing the asset from the
estate.
The former route could reduce a £100,000
life insurance payout by as much as £40,000 if an individual’s
estate is worth more than £325,000, the current inheritance
tax-threshold for individuals, said the report.
Karen Barrett, chief executive at
unbiased.co.uk said: “Ensuring your life insurance payout no longer
forms part of the estate is one of the simplest and most effective
ways of avoiding ‘death tax’ wastage.”
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