Placing life insurance policies ‘under trust’ could save Britons £448 million in inheritance tax

23 Apr 2012

Placing life insurance policies ‘under trust’ could save Britons £448 million in inheritance tax

  • Careful tax planning which puts life insurance ‘under trust’ could save nearly £450 million in unnecessary inheritance tax payments
  • Inheritance tax is Britain’s fourth biggest tax waste area
  • Almost nine out of ten (85%) Brits have taken no action in the last 12 months to reduce the amount of IHT their estate could be liable for’s annual Tax Action Report reveals UK taxpayers will waste £448 million this year due to poor inheritance tax (IHT) planning when it comes to their life insurance policies.

Under current tax rules, life insurance policies are usually free of personal liability, however in certain circumstances your payout may be subject to inheritance tax.  In order to avoid this, individuals taking out life protection specifically to provide for their heirs need to make an important decision before signing on the dotted line.  They can either decide to leave the payout to beneficiaries directly, or alternatively put these policies ‘under trust’, thereby removing the asset from the estate.  The former route could reduce a £100,000 life insurance payout by as much as £40,000 if an individual’s estate is worth more than £325,000, the current inheritance tax-threshold for individuals.

“Ensuring your life insurance payout no longer forms part of the estate is one of the simplest and most effective ways of avoiding ‘death tax’ wastage.  It also reduces the legal loop holes which beneficiaries are usually faced with thereby making it both quicker and easier to distribute the money to the right people” said Karen Barrett, chief executive at’s annual Tax Action campaign aims to educate the 85% of Brits who have done nothing to reduce the amount of tax they pay in the past 12 months and the 27% who claim they do not know how to go about being more tax efficient*.  It also endeavours to help consumers think sensibly about their tax liabilities and take steps to avoid unnecessary tax payments.

Karen Barrett, continued:  “Our 2012 Tax Action Report reveals that huge sums are being paid unnecessarily in inheritance tax every year because of poor tax planning, particularly when it come to looking at life insurance policies.  People spend their lives providing for their loved ones, yet their ‘lack of action’ when it comes to planning their affairs for after they have gone could lead to a heftyinheritance tax bill, not to mention additional stress for the family and potential delay in distributing assets. 

“If you think you could benefit from putting your life insurance ‘under trust’ to avoid a tax raid on your inheritance, visit an independent financial adviser (IFA). Seeking professional advice will help you ensure that your financial arrangements are as tax efficient as possible.

“You can carry out a free and confidential search at  to find an independent financial adviser near you.”


All stats in this release are from theTax Action Report 2012 which has been carried out by Opinium Research on behalf of

* Additional research conducted online by Opinium Research among a sample of 2,013 UK adults between 3 and 6 February 2012.  Data has been weighted to nationally representative criteria.

For more information contact:

Lisa Grando/ Emily Falla/ Maddy Morgan Williams, Lansons Communications:  020 7294 3682

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Category: Insurance & Protection Tagged: Inheritance Tax, tax

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