Recent Government changes to Inheritance Tax (IHT) have placed greater pressure on families, business owners and non-domiciled individuals seeking to pass on wealth efficiently.
From April 2026, a combined £1 million cap on Agricultural Property Relief (APR) and Business Property Relief (BPR) will apply, with any qualifying assets above this threshold taxed at 20 per cent.
Non-doms face further changes from April 2025, with a shift to a residence-based IHT system taxing worldwide assets.
Amidst these tightening rules, one strategy often overlooked is writing a life insurance policy in trust.
A trust is a legal framework where trustees manage assets for beneficiaries.
Applying this to life insurance ensures that, upon the policyholder’s death, proceeds are paid directly into the trust, keeping them outside the taxable estate.
Without a trust, life insurance payouts are included in the estate’s value, potentially increasing the IHT bill. Placing the policy in trust offers several benefits:
You can tailor the trust depending on your needs:
For those who have gifted assets within seven years of death, a life insurance policy in trust can cover potential IHT liabilities where taper relief applies.
It is also particularly relevant for non-doms affected by the upcoming reforms, safeguarding beneficiaries from unexpected tax exposure.
Despite the advantages, there are certain aspects of writing a life insurance policy in trust before going ahead with one.
Bear in mind:
Contact us today for advice and to find out if writing a life insurance policy in trust could work for you.
