Inheritance tax (IHT) is a tax charged on the total estate when someone dies. The Government set a tax-free allowance called the ‘nil-rate band’ (NRB), which is currently £325,000. Any amount above this level is taxed at 40%. Your estate is the value of everything you own, such as your house, car, investments, life assurance policies and the contents of your home.
IHT is normally payable before the executors of your will can distribute your assets, meaning the beneficiaries may have to find the money to pay the IHT bill before they receive the inheritance. This could cause them a significant financial problem.
There are several ways of planning for a potential IHT bill. One of the simplest is using a life assurance policy. The policy can be assigned into trust for the benefit of one or more beneficiaries, who could also be beneficiaries of the will with a level of cover that matches the potential IHT bill. This ensures that when you die your beneficiaries have the money to pay the bill straight away.
Protect offers life assurance cover that can last from a short, fixed period to the whole of your life. It has built-in flexibility that allows it to change as your needs change over time such as an option to increase your cover if the value of your estate increases.