Could life insurance help your family meet a future IHT bill?

From April 2027, changes to Inheritance Tax (IHT) rules could mean that more estates face an IHT liability. As a result, many families may need to think more carefully about how any future tax bill will be paid.

Life insurance, particularly whole of life cover with no set term, is increasingly becoming part of these conversations. While it does not reduce the amount of IHT due, it can provide a cash lump sum that beneficiaries can use to help meet the bill.

This can be particularly useful when much of an estate is tied up in property, investments or other assets that cannot easily be accessed. Without readily available funds, beneficiaries may need to sell assets sooner than they would like, potentially at an unfavourable time. A life insurance payout can provide valuable financial flexibility when it is needed most.

As more families review their estate planning ahead of 2027, ensuring funds are available to meet any future tax liability may become an increasingly important consideration.

Policies can often be written in trust, which may help ensure the proceeds do not form part of the estate and can be paid to beneficiaries more quickly. With the changes approaching, now could be a good time to review your estate planning arrangements.

Trust arrangements are complex and suitability depends on individual circumstances.

The Financial Conduct Authority does not regulate Will writing, tax and trust advice and certain forms of estate planning. Financial protection policies typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.