Funding a potential Inheritance Tax liability

After taking the appropriate steps to put in place an Inheritance Tax planning strategy, if there is still the potential likelihood of a liability on your estate or if you have made gifts which have created a potential liability for the recipients if you die within seven years, we can help you review how you could fund this liability in the most efficient way.


By using life assurance cover, it is possible to use the proceeds to fund a potential Inheritance Tax liability whenever it may arise. Life assurance cover is often the only means of providing immediate protection against a future Inheritance Tax liability. Each premium payment is classed as a gift for Inheritance Tax purposes.

The two common policy types are:

Whole of life policies – To generate a payment on death to cover the tax liability on the estate.

Reducing term policies – To cover the tax liability payable by the recipient of a gift if the donor dies within seven years.

Any policy designed to produce benefits free of Inheritance Tax for your chosen beneficiaries must be written in an appropriate trust. The trust will enable policyholders to retain control over the ultimate destination of the benefits.