Safeguard Your Legacy: How Inheritance Tax Cover Can Help High-Net-Worth Individuals

Imagine a future where your legacy thrives, untouched by the burden of inheritance tax. At Henry Dannell, we understand the importance of preserving your hard-earned wealth and ensuring a smooth transfer of assets to your loved ones.

What is Inheritance Tax Cover?

Inheritance tax (IHT) is a levy applied to the value of an estate exceeding a specific threshold upon the owner’s death. This tax can significantly deplete the inheritance your loved ones receive, potentially forcing them to sell cherished assets to cover the liability.

Inheritance tax cover acts as a financial safeguard. It comprises various insurance products specifically designed to mitigate the impact of IHT. These products provide a tax-free lump sum upon your passing, ensuring your beneficiaries have the resources to settle any IHT liabilities without financial strain.

Who should consider Inheritance Tax Cover?

While anyone with a potential liability can benefit from IHT cover, it holds particular importance for High-Net-Worth (HNW) individuals with larger estates above the IHT threshold, as this could lead to loved ones potentially incurring significant tax liabilities.

Owning a variety of assets, like property, businesses, and investments, can make calculating IHT and the potential tax burden more complex.

As a HNW individual, you may wish to leave a substantial inheritance for future generations. IHT cover protects this legacy by providing funds to settle the bill for your loved ones.

The Benefits of IHT Cover

One of the key benefits is knowing your loved ones are financially equipped to handle IHT, allowing them to grieve without the added burden of complex financial decisions.

IHT cover payouts are typically exempt from further taxation, maximising the value passed on to your beneficiaries.

With various IHT cover options, you can tailor protection to your specific needs and circumstances.

Are there different types of IHT cover?

Among the several avenues available, two approaches stand out for their effectiveness in mitigating IHT liabilities—whole-of-life cover and gift inter vivos.

What is Whole-of-Life insurance?

Whole-of-life insurance is a powerful tool in inheritance tax planning. This type of policy provides a guaranteed payout upon the policyholder’s passing, creating a tax-free lump sum that can be utilised to cover any IHT liabilities. By securing a policy that is placed within a trust, the proceeds can be kept outside of the individual’s estate, reducing its taxable value.

Key benefits of whole-of-life cover in IHT mitigation include:

Whole-of-life cover It offers financial security by ensuring that the beneficiaries receive a lump sum, enabling them to settle any IHT liabilities without having to sell off assets.

The proceeds from the policy are typically exempt from inheritance tax, thus safeguarding a considerable portion of the estate.

Policies can be tailored to meet individual needs, allowing clients to adjust coverage according to changes in their financial circumstances.

What is Gift Inter Vivos?

Gift inter vivos refers to a decreasing term assurance that protects the liability period following a gift being made out of an estate, once all allowances have been exhausted. When gifts are made and the individual survives seven years from the date of the gift, these gifts are generally exempt from IHT. By insuring these 7 years, in line with the decreasing liability, this means that should the death of a giftee occur within the liability period, insurance is in place to ensure the tax is covered.

Key benefits of gift inter vivos for IHT cover include:

Gift Inter Vivos policies offer peace of mind to both the giftee and the beneficiary. Insuring the liability period means that tax liability is covered via insurance, providing reassurance.

With the seven-year rule, gifts made more than seven years before the individual’s passing are typically excluded from the estate’s value for IHT purposes.

Various gift allowances and exemptions can be utilised to minimise the tax burden, such as the annual gift allowance, and small gifts exemption.

By including IHT cover in your financial plan, you can secure your legacy and ensure your wealth benefits future generations

However, it’s crucial to note that individual circumstances vary, and professional advice tailored to each client’s specific situation is essential in implementing effective inheritance tax mitigation strategies.

At Henry Dannell, we offer personalised guidance and expertise to help you navigate the complexities of IHT cover. Don’t let inheritance tax jeopardise your legacy. Contact us today for personalised guidance on safeguarding your wealth for future generations.

Please note: We are not tax advisers. Our advice relates to the insurance policies used to cover such liabilities, which should be validated by a relevant professional. Please also note, the Financial Conduct Authority does not regulate will writing, inheritance tax planning, and trust planning.

Author:
Charles Alexander
Mortgage & Protection Adviser
CONTACT

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