Rising house prices in the South and South East mean many homeowners should consider putting their life cover in trust, according to specialist insurance intermediaries LifeSearch. As part of a drive highlighting the value of trusts in planning life insurance, LifeSearch stressed that life cover held in trust incurs no inheritance tax (IHT).
Kevin Carr, senior technical adviser at LifeSearch, said there were many examples in the South where an estate is sizeable and where it could be of interest to the client to put life cover in a trust. The IHT threshold is currently at £255,000 and Land Registry figures show the cost of an average Greater London property is £262,043.
He said: “Many people with larger estates due to present house prices may want to keep the debt in the estate. Leaving the mortgage debt outstanding will have the effect of lowering any inheritance tax bill. Leaving the life cover in trust will achieve that.”
He pointed out that IHT was once a tax on the rich and is now a tax on middle England. “There is always talk of doubling the threshold for IHT, but it tends to go up by £5,000 a year, while house prices have gone up an awful lot more. IHT used to affect 3%-4% of the population. It now could conceivably affect 30%-40% of the population,” he said. Both new and existing life insurance policies can be placed in trust.
LifeSearch also pointed out that a life policy written in trust will not be subject to probate, so the value of the policy can be paid out immediately to the estate.