Know The Advantages of a Whole of Life Assurance Plan When Inheritance Tax Planning
When thinking about inheritance tax preparation, one of the simplest things you do is create a Whole of Life Assurance Policy to provide the finances needed to pay this once your client passes away. A single person’s life plan insures the applicant for the lifetime and if it is placed on trust then the proceeds become part of the estate and the beneficiaries would benefit from the proceeds after insured persons death. It would be joint-life death insurance for a married or civil partnership pair who is giving all to on first death, again put under trust to benefit those who will eventually inherit their joint assets.
In these situations, you’d opt with a guaranteed premium product so that consumers know exactly how much it’ll cost them each month, based on how long they live. They may want the insurance to increase with inflation to allow for any effect on the value of their estate without applying for new insurance every year.
On the second death of a husband or wife, the whole of life insurance usually pays out. It’s set up this way since IHT usually is only due after the second death (assuming that each spouse leaves the majority of their wealth to the other spouse). So because a plan depends on two people dying rather than just one, the existence of that second life extends the plan’s likely lifespan. It usually decreases the price of the premium.
The plan can be set up in various ways, but to keep things simple, there are two primary options: a guaranteed premium and a reviewable premium. A guaranteed premium as much higher monthly premium , but it will not change (but for indexing options chosen at the outset). A subject to review premium begins at a low level and increases slightly as you get older.
Benefits of Whole of Life Assurance Plan:
You can get life insurance to help pay for any IHT due on your estate when you pass away. Life insurance is available in various types, the most common of which are term assurance and mortgage protection (these are both types of term assurance).
But did you realize that after you reach a certain age, your term insurance policy will expire? It means that if you make old bones, you’re unlikely to receive this cover. A Whole of Life Assurance (WOL) policy is another alternative that may be more suitable for inheritance tax preparation. When you die, this will pay the benefit amount.
If your policy is held in trust, the proceeds will be transferred straight to your beneficiaries, avoiding any delays or difficulties in paying the IHT. It means that instead of being used to pay a tax bill, your estate can hand it on to those you care about. It’s essential to use an appropriate trust; otherwise, the policy profits may be paid to the estate, raising the IHT liability.
Consider These Factors:
These plans can also be written with a fixed premium. A guaranteed premium is calculated at the beginning of your client’s plan and would not change unless the amount of coverage changes. It may be a better option for someone who does not have the ability or desire to minimize their liability or needs to know how much their insurance will cost for the rest of their life.
It’s also necessary to guarantee that the plan is written in a trustworthy manner. Providers frequently have a tool to help you determine the best trust structure and form for your customer. If the policy will be included in your client’s estate without a trust, compounding the inheritance tax issue. Your client should also consider who must act as trustees. A trustee should be someone your client trusts to perform their responsibilities, such as a spouse, other family members, or a friend. Trustees have many responsibilities and obligations; thus, the role should not be taken lightly. That’s why your client should make sure that the new trustees are aware of their plans so they can carry them out.
It can be a costly option in reality, but it is highly likely to save you money compared to the 40% IHT that your beneficiaries would have to pay on your extra estate. Each circumstance is unique, and for some, WOL could be the only suitable option.
It is usually when you don’t have a lot of financial cash (cash and investments). If your money is locked up in your home or buy to let properties, you don’t want to sell. If you are interested and need any guidance regarding the Whole of Life Assurance Policy, you must contact Mountview Financial Solutions in London & Essex. Their expert insurance adviser gives you the correct guidance regarding personal protection.