Putting assets ‘under trust’ effectively removes assets from the estate, and means the money will not be subject to inheritance tax.
The Tax Action Report from Unbiased indicates that nine out of ten (85%) Brits have taken no action in the last year to reduce the amount of inheritance tax their estate could be liable for.
In addition, 27% claim they do not know how to go about being more tax efficient.
For an estate worth £325,000, not placing life insurance policies under trust will reduce a £100,000 life insurance payout by as much as £40,000.
Karen Barrett chief executive of Unbiased said: “Our 2012 Tax Action Report reveals that huge sums are being paid unnecessarily in inheritance tax every year because of poor tax planning, particularly when it come to looking at life-insurance policies.
“People spend their lives providing for their loved ones, yet their ‘lack of action’ when it comes to planning their affairs for after they have gone could lead to a hefty inheritance tax bill, not to mention additional stress for the family and potential delay in distributing assets.”
