- Life insurance can be decent value for money and escapes IHT if wrapped into a trust
- It can help your beneficiaries settle a chunky IHT bill on the rest of the estate
- Make sure you have enough capital to afford the premium until the end
There are many options to mitigate inheritance tax (IHT), from giving away assets during your lifetime to riskier alternatives such as investing in Aim shares. The IHT tax-free threshold has been fixed at £325,000 since 2009, although this increases to £500,000 if you give away your home to your children or grandchildren. Its real value has shrunk over the years as house prices have gone up, meaning more and more estates have been captured by it, and the government is amassing record IHT receipts.
One less well-known strategy to reduce IHT involves taking out a life insurance policy and wrapping it into a trust. This can ensure your beneficiaries receive a lump sum at your death, which they can also use to pay the bill on the rest of your estate.