How To Reduce Inheritance Tax Liability

/ 1st July 2016 /

The new Whole of Life policy from Royal London offers fixed premiums and cover that can be used to offset inheritance tax liability, according to Sara Murphy, Senior Marketing Executive with Royal London

When you leave an inheritance, will your loved ones receive the full amount you intended or will they have to share their inheritance with the tax man? It’s a question many people need to consider when making a will. You may not be aware that there is a life insurance product available that can help you offset a potential inheritance tax liability.

A Whole of Life policy could offer the solution as it offers financial protection for the whole of your life. It’s a life insurance policy that, when set up correctly, is approved by Revenue and can be used to offset any inheritance tax liability that may be due when you die. If the money that is paid out is then used to pay inheritance tax, it is then not liable to tax.

Unique Feature

Royal London, a protection specialist based in Dublin, has recently launched a new Whole of Life policy. It has fixed premiums and cover so you are assured that the premiums you pay will never go up unless you choose to increase your cover.

It also has a unique feature that no other provider offers – the ability to change your mind after 15 years and still get some benefit from the policy. For example, if the Government increases the inheritance tax thresholds and inheritance tax is no longer a concern, you could end the policy and still get something back.

Life Changes Option

This innovative feature addresses the previous lack of flexibility in the product structures which could put people off from taking out such a policy. The feature is called a ‘Life Changes Option’ and offers much needed choice and control, so you can adapt your policy if your life circumstances change. It gives you the option to stop paying premiums after having had your policy for 15 years, and
+ Choose to have a lower amount paid out when you die (Protected Cover), or
+ Choose to take an immediate cashback amount and end the policy (Protected Cashback – up to 70% of your premiums).

This option also promises that your premiums will stop at your 100th birthday, but cover will continue. So you can know from the start the absolute maximum you’ll ever pay in premiums. Your local Financial Broker can provide a quote with the exact amount you will pay and receive based on your individual circumstances.

Inheritance Tax Thresholds

The continuing economic recovery has led to rising property values and pension and investment funds increasing in value. And although the tax threshold for Group A (inheritances received from parents) was raised in the last Budget, it is still down 46% since 2008.* This, coupled with the tax rate of 33%, means that a tax bill following the death of a loved one is something many people could face.

Inheritance tax is payable to Revenue when the value of the assets inherited is higher than a certain threshold amount. For inheritances received from parents, this threshold amount is €280,000. Anything over that amount is subject to a 33% inheritance tax. In 2015 alone, Revenue collected €405 million in Capital Acquisitions Tax, up from €361 million in 2014.*

Setting up a Whole of Life insurance policy to help offset this inheritance tax liability can help you protect your loved ones and your legacy. Your local Financial Broker can advise you on how to do this.