Life assurance for inheritance tax is a useful option

There are many options you could consider when trying to minimise the amount of inheritance tax your assets will be penalised with. A list of the most well used options was summarised in a recent blog – inheritance tax ideas.

One of these was the idea of taking out life assurance to cover the liability. The reason I like this option is that the majority of people I come across do not want to lose control of their assets. Having spent a lifetime building up assets, it is difficult to give them away, even to children.

This is partly becasue you just don’t know how much you will need. How much you want to spend and when, is a difficult thing to know for anyone. In addition the need for later life care and the fees involved are also a big unknown. Plus there is always the consideration that children might not use the money as well as you would want it to be used, not to mention the issue of divorce, and partners taking a share of your money.

All of these considerations leave many people to just accept that they will hold on to their own money and assets so they know they can make best use of them in their lifetime. I think that’s fine and fits with the philosophy that money should make you feel comfortable and happy.

However, the inevitable tax bill will arrive one day and it is a shame, unless you like paying tax, that 40% of your assets (after the nil rate band of £325,000 each) will be taxed and the bill sent to your beneficiaries. So an easy answer might be to take out a life assurance policy to cover the bill so that when it does arrive there is a lump sum of money all ready and waiting.

The costs can be quite attractive too and as an ‘investment’ can work out to be good value for money.

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Blog by Jaskarn Pawar

Jaskarn Pawar is an experienced and award winning Chartered and Certified Financial Planner. He advises people all over the UK on financial planning and wealth management issues to help them reach solutions to fit their personal needs. You can contact Jaskarn on 01604 211234 or by e-mail on