Back to basics: life insurance key part of financial planning
By Kirsten Hastings, 1 Sep 17
IHT planning, nil rate bands and replacing pension scheme death benefits are some of the reasons life insurance needs to remain a core part of financial planning, according to Chris Lean, a chartered financial planner with Aisa International. Click through the slides below to see six key reasons advisers need to speak to clients about ensuring they are protected.
Gifting to future generations is a popular way of estate reduction for UK domiciles. The smaller the estate, the lower the IHT liability in the future.
However, gifts up to the NRB are still deemed to be in the estate for IHT calculations for seven years. For someone that gifts up to the NRB, there is a potential IHT saving of £130,000 but only after seven years.
A simple seven-year level term life insurance policy, written into trust, to cover this £130,000 liability in the meantime, will ensure the full value of the gift is maintained.
For gifts above the NRB, taper relief rules apply. This is where the liability to IHT starts to reduce after three years and disappears after seven years.
A suitable decreasing term policy, in trust (AKA Inter Vivos), will cover the reducing IHT liability over that seven years above the NRB.
Care must be taken to ensure the HM Revenue & Customs‘ rules about potentially exempt transfers (Pets) are understood, as well as the chargeable lifetime transfer rules.
Tags: Aisa Group | IHT | Nil Rate Band | Pension
