Despite Inheritance Tax being one of the easiest taxes to avoid, very few people take active steps to reduce this tax. This lack of means that HMRC often will take a larger shares of the estate than the beneficiaries!
However one of the reasons for the tax being so prevalent, is that many people who take out life insurance are unaware that on death the proceeds will be paid to their estate. This means that your beneficiaries may not be able to get their hands on money when they most desperately need it (as often probate will take 6-9 months to complete), but it also means that the life insurance payout may tip your estate over into the inheritance tax bracket.
Ensuring your life insurance payout is excluded from your estate is often the simplest and most effective way to reduce inheritance tax. Placing your policy in trust makes the payout tax efficient and also allows you to control who the monies are paid to.
There are other technical steps required to ensure that the payment out of a life policy is speeded up (typically these are ignored in 90% of the policies we examine). So you cannot rely on a trust alone.
Please ensure that you obtain professional advice. On reviewing one of our clients financial affairs we discovered that his solicitor had forgotten to nominate himself and his wife in their wills!
In addition they had received advice on taking out a joint policy for inheritance tax and they had been advised that they both should be the trustees. As this policy would not payout until after the second death I asked if it would be necessary to hold a séance to determine how the assets of the trust should be paid out.
The clients response is unprintable !!!!
Ray Best can help you protect your financial future. To find out more, simply click here!