
Inheritance TaxInsurance
Support your estate planning with tailored Inheritance Tax insurance solutions. Our advisers work closely with you to help reduce the financial burden of IHT on your beneficiaries through carefully structured life insurance options.

Insurance aligned with IHT planning

Expert-led access to specialist providers

Custom cover for diverse asset profiles
Please note: tax treatment is based on individual circumstances and may be subject to change in the future. Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from taxation, are subject to change. Please also note: the Financial Conduct Authority does not regulate will writing, inheritance tax planning, and trust planning.

What is Inheritance Tax?
Inheritance Tax (IHT) is charged on the value of an estate after death once it exceeds a defined threshold, currently £325,000, known as the nil-rate band. However, if the estate is left to a surviving spouse or civil partner, it is exempt from IHT, and any unused nil-rate band can be transferred to the survivor, potentially increasing their own threshold to up to £650,000. Any value above this threshold is typically taxed at 40%, although various reliefs and exemptions may apply, depending on individual circumstances.
If not planned for in advance, IHT can represent a significant cost to an estate, potentially reducing the amount passed on to beneficiaries. As part of a broader estate planning strategy, certain types of life insurance policies can be used to help cover or mitigate these liabilities, providing financial certainty for those inheriting the estate.
Below, we explore two types of insurance policies that can support an effective inheritance tax strategy.

What is a Gift Inter
Vivos policy?
A Gift Inter Vivos life assurance policy is designed to cover the potential Inheritance Tax liability that may arise if the donor of a gift dies within seven years of making that gift.
Under current UK tax rules, gifts made during a donor’s lifetime remain part of their estate for up to seven years. If the donor passes away within that timeframe, the gifted assets may be liable for Inheritance Tax.
If the donor survives at least three years after making the gift, any tax due begins to taper down annually until year seven, after which no tax applies. A Gift Inter Vivos policy is structured so that the sum assured decreases in line with this taper relief, ensuring the cover matches the reducing IHT liability.
When written in trust, the policy’s payout can be made directly to the beneficiaries, bypassing probate. This enables quick access to the funds required to cover any tax due on the gifted amount. Because the proceeds are paid outside the donor’s estate, they generally do not add to the estate’s taxable value.
Individuals making significant financial gifts such as property, shares, or large cash sums may wish to ensure that the recipient is not burdened with an unexpected tax bill. A Gift Inter Vivos policy provides peace of mind that any IHT liability can be settled without depleting the value of the gift itself.
For those with property assets they are looking to transfer, we can assist with combined mortgage and protection solutions making use of a concessionary purchase and linked Gift Inter Vivos policy.

Whole of Life Insurance Solutions for Inheritance Tax
Whole of Life Joint Life/Second Death insurance is particularly relevant for couples whose assets exceed the inheritance tax-free threshold but are unable to make significant gifts due to wealth being tied up in their primary residence.
This policy pays out on the death of the second policyholder. In the case of married couples, should one spouse pass away, the surviving spouse must continue premium payments until their own death.
It is essential that the policy is written in trust. This ensures the proceeds are paid outside the estate, avoiding both probate delays and further tax. The beneficiaries can then use the payout to settle any Inheritance Tax liability that becomes due.

The Value of
Expert Advice
At Henry Dannell, we understand that every client’s circumstances are unique, especially when it comes to inheritance tax planning. Our experienced advisers act as facilitators, sourcing and coordinating the most appropriate cover from our extensive and trusted network of specialist providers.
We take the time to fully understand your financial situation, family needs, and legacy goals, crafting a personalised approach that reflects your wider estate planning objectives. We also collaborate closely with your existing advisers, whether wealth managers, family offices, or tax and legal professionals—to ensure any recommended policy is structured appropriately, whether through a trust or as part of a broader strategy.
This hands-on, expert-led guidance helps to reduce potential pitfalls, providing reassurance that your loved ones will benefit from a well-considered, coherent plan.
Frequently Asked Questions
If you’re making significant lifetime gifts that exceed the IHT nil-rate band, this insurance can protect your beneficiaries from potential tax liabilities.
While not mandatory, writing the policy in trust ensures a quicker payout and prevents the proceeds from being added to your estate, which could increase IHT liabilities.
The policy’s coverage amount decreases annually in line with the taper relief schedule, reflecting the reducing IHT liability over the seven-year period.

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