Securing Your Legacy


Peter O’Sullivan

Peter O’Sullivan

Managing Director


As you would expect, we encourage our clients to consider preserving their wealth and protecting themselves and their families by using insurance to reinforce specific types of planning, such as inheritance tax (IHT) planning.

Insuring gifts

Gifts provide a very straightforward way of reducing IHT because they fall out of the estate after just seven years and there are no taxes on the recipient when the gift is made. A form of ‘taper relief’ reduces the tax bill on larger gifts when the donor survives for more than three years.

If a gifting strategy is being pursued, the humble level-term assurance plan can guarantee IHT savings.  Term assurance usually provides a fixed amount of cover, but these straightforward plans can also be structured to match the reducing IHT liability created by taper relief.

Insuring gifts is particularly important in situations where the recipient will not have the liquidity to cover the potential tax bill. For example, if a property is being gifted or, alternatively, if the funds being given away are to be spent (say on school fees), the recipient may not have the cash to cover the IHT bill.

Insurance policies can be effectively used and tailored to a number of specific scenarios

Protecting assets

Another form of life assurance, whole of life assurance, can be used to protect assets against IHT. As long as the premiums are paid, the insurance company pays the agreed sum. There are two types of whole of life policy: guaranteed premium plans and reviewable plans.

Guaranteed whole of life has a fixed sum assured and the premiums are also fixed. This type of policy should be considered to protect assets, such as the family home, where there may always be an IHT liability.

Where planning is undertaken to reduce the value of an estate over time, a reviewable whole of life policy may be appropriate. The amount of cover and the premium are fixed for a specified term. The first review period is typically 10 years, with subsequent reviews occurring every five or 10 years. Importantly, the health of the insured, which may have deteriorated, is not reassessed.

Working with trusts

As well as making outright gifts, some clients prefer to give away assets but retain control of when beneficiaries can access funds.

A common strategy is to settle an amount up to the available nil-rate band (NRB) into a trust every seven years, which reduces the value of the estate at the same time as transferring assets tax efficiently to benefit future generations. The person who establishes the trust is known as the Settlor.

If the settlor survives for seven years after transferring assets into a trust, the value put into the trust does not form part of their estate. If the settlor does not survive, however, the NRB is absorbed by the gift to the trust and is not available when calculating the IHT payable. Term assurance can again be used to offset the additional IHT the estate might suffer.

This is for information only and does not represent personal advice or a personal recommendation, and should not be interpreted as such. Please do not act upon any part of it without first having consulted an Independent Financial Adviser.


Peter O’Sullivan

Peter O’Sullivan

Managing Director


Peter is a Chartered Financial Planner and Fellow of the Chartered Insurance Institute.  A Financial Adviser since 1987, Peter retains a close working relationship with his clients.


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