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L&G simplifies IHT planning

Legal & Generals whole of life protection plan is a whole of life insurance plan designed as a simple product for inheritance tax planning.

The policy pays out a guaranteed lump sum on death that can be used for personal or business IHT purposes. On the personal side, IHT is a growing concern for people due to an increase in property values. On the business side, if a key partner in a business dies, the surviving business partner may need money to buy the deceaseds share of the business. For business purposes, benefits of this policy can be paid as a lump sum or instalments over two, three or five years.

Currently, if an estate is valued at more than 263,000, any amount above this threshold may be subject to IHT at the rate of 40 per cent. Although some people believe this can be taken from the estate, the reality is the tax bill must first be paid to release the estate. By writing a whole of life policy under trust for the estates beneficiaries, expected tax bills can be easily taken care of.

This product has guaranteed premiums but if the indexation option is chosen the premiums will increase by double the percentage rise in the RPI. This reflect the fact that the older the policyholder gets, the more the cost of life cover.

Another feature of the plan is the guaranteed insurability option. This means that if circumstance change as a result of an event such as marriage or an increase in a business loan, cover can be increased without the need for further medical information.

As this is a simple product for a specific need, there is no investment element or surrender value. The main drawback is that policyholders must keep paying the premiums, otherwise cover will stop and premiums already paid will not be refunded.

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