Wealthy families are using life insurance policies to beat Rachel Reeves\u2019s inheritance tax raids.<\/p>\n
Brokers and financial advisers have told The Times that enquiries about life insurance policies for inheritance tax purposes have more than doubled since the chancellor announced a wave of reforms to the system in October. <\/p>\n
Life insurance is expensive but it will pay out a lump sum when you die and the policy can be put in trust, so it will be outside your estate for inheritance tax (IHT) purposes. It can be set up to automatically pay off any bills.<\/p>\n
Edward Durell from the life insurance specialist Cover Direct said: \u201cWe have seen a huge increase in people asking about using life insurance policies as a cost effective way to mitigate inheritance tax. I would say these are up about 100 per cent.<\/p>\n
\u201cThere are a lot of positives to these policies because they will immediately pay out and cover that bill, meaning there is no need for beneficiaries to sell property, or get into difficulties paying the taxman.\u201d <\/p>\n
In her first budget in October, the chancellor made changes to agricultural property relief and business property relief systems so that estates or companies will have to pay 20 per cent IHT on assets above \u00a31 million from April 2026. Previously these businesses had been exempt from inheritance tax, regardless of the size of their estate. <\/p>\n
Mike Strutt from Risk Assured, another life insurer, said the changes had resulted in a doubling of the number of enquiries from customers looking to take out lifetime insurance policies to help soften expensive bills for relatives. <\/p>\n
Strutt, whose company specialises in IHT policies, said that because the legislation had not been published yet, many had not yet signed up to these policies. \u201cWe are encouraging people to get their ducks in a row so that they are ready to roll when they do. We expect there to be a big wave of people taking out policies when the IHT changes come in,\u201d he said. <\/p>\n
The increase in inquiries is largely driven by those looking to take out whole life policies (also known as life assurance) where you pay a monthly premium to get a lump sum when you die. <\/p>\n