Case study – Inheritance Tax Protection

One of our Private Wealth clients had made several gifts, and was about to make another significant one as the result of a property sale. Each gift created a potential inheritance tax liability with total potential liability in excess of £2 million.

There is a liability to inheritance tax for seven years after a gift is made, with liability gradually reducing after three years. We arranged an insurance cover to pay this liability in the event of the death of the donor in the first seven years.

As each gift was given at a different time, we created a model to determine how the total inheritance tax liability changed every month for all of the gifts going forward. Then, we sourced insurance policies to meet the potential for inheritance tax (IHT) as closely as possible.

As the cover was not placed at the time each gift was made, it was not practical to meet the precise profile of the IHT liability. We agreed with the client that there would be some months where the cover would be higher than strictly required. We placed a suite of term insurance policies and wrote the policies under trust, so that in the event of the death of the donor, the resulting payment would not form part of their estate.

We agreed to work on a fee basis enabling the policies to be placed on nil commission terms, resulting in reduced overall costs for the client.