Life insurance policies aren't just the concern of families and parents with young children.
Apart from the more obvious aims of protecting your family and the home they live in, a life insurance policy can be a useful way of protecting any inheritance you plan on leaving behind. And it's a popular option, as many people prefer to leave more to their heirs than to the Inland Revenue.
Your estate (your total financial wealth) would normally have to be worth a certain amount before any inheritance tax (IHT) might need to be paid - people with larger estates (in excess of £325,000 for individuals or £650,000 for married couples or partners in a civil partnership).
If you are married or partners in a civil partnership and were to leave all of your individually owned assets to each other, any inheritance tax liability is unlikely to be claimed until the second partner dies, after they have inherited extra wealth from the first partner that died.
Since October 2007, new rules mean that this is less of an IHT issue than it used to be, however, you may still be better to put life insurance plans in trust and to have them pay out directly to beneficiaries other than a spouse or civil partner, like children or grand children.
Often any resulting IHT tax bill will need to be paid before probate is granted. So your family could find themselves having to take out a loan before your assets can be sold to pay the outstanding IHT tax bill.
A life insurance policy could help your family by paying this tax bill on your death. Not only does this save the hassle of taking out a loan and paying unnecessary interest, it also covers the tax liability, leaving your heirs to enjoy the full value of whatever you gift to them.
