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Insurance loop-hole could aid IHT planning
Insurance could be used as a loop-hole to help avoid large IHT bills, according to Plymouth-based IFA firm Continuum.
It warned the tax take from IHT is set to soar over the next five years beyond the £7bn HMRC collected last year.
Inheritance tax was conceived as a tax on the wealthy classes, but decades of inflation have spread the burden from landed gentry to ordinary people, Continuum said.
Meanwhile the government has been busy closing many of the loopholes around the use of trusts and pensions to avoid IHT.
Chartered Financial Planner Ben Alcock said: "Trusts used to be a simple answer to pass down wealth tax efficiently, but they can be complicated and many of the loopholes that made them so effective in the past have been closed.
"Using a pension has become a popular way of passing on money without paying IHT, but HMRC is currently proposing closing this loophole too."
He suggested that taking out a whole of life insurance policy could provide a large sum payable on death which executors could use to cover someone’s IHT liability.
Mr Alcock said: “If set up in the correct way, it could leave a legacy intact.”
According to research published by HSBC Life, four in ten financial advice firms do not have a clear strategy for intergenerational planning, and just one in three have discussed wealth transfer plans with their clients' children.
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