Insurance

FORTHCOMING CHANGE: In the Budget on 30 October 2024, the Chancellor of the Exchequer, Rachel Reeves, announced that from 6 April 2027, unused pension funds and death benefits will be treated as part of an individual’s estate for inheritance tax purposes. The government is consulting until 22 January 2025 about the mechanism for achieving this measure. This will cover death in service benefits and death benefits payable during retirement but it is not yet clear whether it will cover life assurance benefits provided by an employer.

Life assurance and estate planning

Life assurance can be an important tool in estate planning and there are various types of life assurance policies available:

  1. a whole life policy—this type of policy will pay out a sum on the death of the life insured, whenever that death occurs, in return for a premium

  2. a term assurance policy—this type of policy insures a person’s life for a specific sum and for a specific length of time, typically for a period up to 20 years. If the insured person dies within the term of the cover, the life assurance company

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All in? Court confirms when a settlement is 'made' for the purposes of excluded property (Accuro Trust (Switzerland) SA v The Commissioners for HMRC)

Private Client analysis: This case considered the meaning of 'relevant property' under the settlements regime of the Inheritance Tax Act 1984 (IHTA 1984) and, in particular, the time at which this definition is to be tested. The question arose as to whether the trustees of an offshore trust established by a non-UK domiciled settlor were subject to the UK settlements regime in respect of property added to the trust after the settlor became deemed domiciled in the UK, or whether they were exempt from such charges as the trust consisted solely of excluded property. The First-tier Tribunal (FTT) held that whether trust property is excluded property is based on the status of the trust at the time that it was established, not at the time that the property in question was added to the settlement. As a result, the trust in this case did consist solely of excluded property and no inheritance tax (IHT) charges arose as a result of either the ten-year anniversary or capital distributions. The FTT was also asked to consider whether their jurisdiction was appellate, or supervisory only. The FTT held that, while their jurisdiction was supervisory, the questions raised by the trustees were relevant in establishing whether HMRC had acted reasonably and that the outcome (ie that the paid IHT should be refunded and that no further IHT was due) would be the same in either case. Written by Katherine Willmott, senior associate solicitor at Foot Anstey LLP.

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