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Have you ever considered how your children or relatives will pay your Inheritance Tax bill when you are no longer here?

Chris Slatter, an Independent Financial Adviser from Ellacotts Wealth Planning, explains how you can minimise your Inheritance Tax bill, and how you can plan ahead to help pay for it.

When we consider Inheritance Tax (IHT) planning for clients, generally there are both agricultural and non-agricultural assets.

Once we have established what assets may qualify for Agricultural Property Relief and Business Property Relief, there may be further assets on which IHT will be charged. Gifts may be appropriate to further reduce IHT.

Sometimes, the only way of dealing with a potential liability is to accept that the tax is going to be due at some stage and to make provision for your beneficiaries to be able to pay the tax without having to sell family assets.

Taking out an Insurance Policy to cover Inheritance Tax

Taking out an insurance policy to cover the IHT can be a simple, cost-effective way of dealing with the issue. Whole of Life Assurance is designed to provide cover for the rest of your life, as long as you continue to pay the premiums.

For a married couple, the plan would be set up on a second death basis. This is by far the most cost-effective way of writing the cover, as premiums are a lot less than for two single life plans. The plan should be written in trust: otherwise, benefits will be paid to the estate, which makes the overall problem worse. Another advantage of using a trust is that the insurance company do not need to wait until probate has been issued before paying out benefits.

This type of plan would be medically underwritten. Because clients considering this cover are generally older, the underwriting is quite stringent.

In summary, taking out an insurance policy to plan for IHT due provides your beneficiaries with a lump sum to pay the tax when it becomes due without having to sell assets. Please remember, this type of insurance will not mitigate the tax due.

We can help you with Inheritance Tax

Your usual Ellacotts contact, and Chris Slatter in the Ellacotts Wealth Planning team, would be pleased to discuss how insurance could help you plan for potential Inheritance Tax liabilities.

If you need any advice on planning for IHT, please contact Chris Slatter on or call 01295 250401 or contact us here.