Whole of Life Insurance
Whole of life insurance is Financial protection which pays a lump sum to protect your family in the event of your death.
Unlike other insurance products it does not have a term and therefore does not expire.
Whole of life insurance can protect the current, or projected future, inheritance tax liability. As a result, when the estate is inherited by the beneficiaries the life insurance pays the IHT liability and therefore, the full estate value is received by the beneficiaries.
Potentially Exempt Transfers (PET)
A Potentially Exempt Transfer is a gift from the your estate to an individual or trust. The value of the gift becomes exempt from Inheritance Tax if the donor survives for seven years following the gift date. If the donor does not survive seven years then the gift value is subject to taper relief as illustrated below.
The inheritance tax liability of a gift can be protected by using multiple term assurance products. Therefore, if the donor does not survive for seven years the Inheritance Tax liability is still protected and the beneficiaries of the estate will still receive the full estate value.
See how much of the gift value is liable to Inheritance Tax over time
Years 1 to 3 following date of gift
Year 4 following date of gift
Year 5 following date of gift
Year 6 following date of gift
Year 7 following date of gift
7 years passed from date of gift