The ideal way of avoiding IHT is by placing a policy in a trust, by doing this you are placing the value of the policy outside of your estate, therefore Inheritance Tax does not apply. As an example let’s use an estate that’s worth £500,000, £100,000 of which is life insurance that is not in a trust. With the current Inheritance Tax threshold at £325,000, this results in £175,000 being liable to 40% Inheritance Tax, meaning £70,000 lining the pockets of the taxman. Deciding against a Life Insurance policy and choosing a trust reduces the estate to £400,000, leaving £75,000 over the threshold to be taxed and reducing the Inheritance Tax sum to £30,000.
That leaves an incredible saving of £40,000 on tax that the beneficiary receives.If you like what you're reading, click on the link at the top to find out more advantages of a life insurance trust and watch the video on the website also, enjoy!
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