Editor's note: This brief was summarised by The Property AI Newsroom from a report by Mortgage Strategy. Read the original article for full details.
Whole-of-Life Insurance Gains Focus as Inheritance Tax Rules Change
Pensions will be brought within the scope of inheritance tax (IHT) in the next tax year, fundamentally shifting how clients approach estate planning. This change is leading to increased attention on whole-of-life (WOL) insurance policies as a tool for managing IHT liabilities.
Many clients who previously relied on pensions for legacy planning now face the prospect of higher IHT bills for their beneficiaries. Without proper planning, these liabilities could force beneficiaries to sell assets quickly, potentially in less-than-ideal circumstances.
Protection products, particularly WOL policies, are being reconsidered as central components of estate planning. Unlike term assurance, which covers a fixed period, WOL policies provide permanent cover, paying out whenever death occurs as long as premiums are maintained. This permanence allows for more certainty in planning for IHT liabilities.
A policy written in trust can provide a lump sum specifically intended to meet IHT obligations, helping to preserve the estate for beneficiaries. However, arranging WOL cover is more complex than standard term assurance. The market has fewer providers, and underwriting is often more involved, especially for older clients or those requiring higher sums assured. Medical evidence is more likely to be requested, and cases can take longer to process.
Advisers are encouraged to start these conversations early, as leaving them too late can limit available options, particularly if health issues arise. With the 2027 changes approaching, there is an opportunity for advisers to review clients’ needs and consider WOL cover as part of a blended approach to estate planning.
For UK letting agents and inventory clerks, understanding these shifts in estate planning and protection products may be relevant when advising landlords and property owners on long-term financial planning and asset preservation.
Source: Mortgage Strategy