Pictured above: Mark Hildred
Moore Thompson accountants are warning Life Insurance Policy
Holders to check the wording in relation to tax breaks.
When taking out a life insurance policy, it is relatively easy
to word it so that any payout will escape Inheritance Tax (IHT) -
but with joint policies this can be more difficult, meaning the tax
break may not apply.
This will usually be the case either when the couple concerned
are joint tenants-in-common or joint beneficial owners, meaning
that when the policy pays out it becomes part of the deceased's
estate, and therefore liable to IHT.
On the other hand, for policies where each has a contractual
right to the full value of the property from the moment the other
dies, there is no value in the policy until one of them dies, and
therefore IHT cannot be charged.
Mark Hildred, managing partner at Moore Thompson, said: "In
reality, many people will not be aware of which category their life
insurance falls into and would not be in a position to determine
the precise wording anyway. A simpler alternative may be for both
partners to consider taking out single life insurance policies
rather than a joint one.
"Single policies are unlikely to be significantly more expensive
and are easier to put 'in trust', for the benefit of the other
policyholder, or other beneficiaries such as the couple's children.
This option would also allow the couple to select different levels
of cover, if appropriate, which may also help to keep costs
down".
For more information, please contact Moore Thompson on 01775
711333 or visit www.moorethompson.co.uk.