Unnecessary tax on life insurance not in trust

Fri, 03 Aug 2007

As much as £1 billion may be subject to inheritance tax over the course of 2007, in an entirely avoidable way. By failing to write life insurance policies in trust, the investment company Skandia argue, individuals could be losing out on millions in tax bills.

Skandia pointed to previous data indicating millions of pounds of tax on life insurance policies not held in trust. If these insurance policies had been written in trust, Skandia say, the inheritance tax bill could be entirely avoidable.

Skandia went further, saying it should be the responsibility of independent financial advisers to explain to clients the benefits and otherwise of writing policies in a trust. The head of tax and financial planning at Skandia, Colin Jelley, reportedly commented: "When someone takes out a life insurance policy, setting up a trust is a simple step that can be well worth doing. The value of holding a policy in a trust can be substantial and there are seldom situations where it makes sense not to put a protection policy in trust. Nearly £1 billion may have been taxed unnecessarily in a single year – it would be crazy for that to happen again this year."
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