Have you heard of accelerated inheritance tax products? No? Well you’re not alone. These products combine Business Property Relief (BPR) and group insurance policy in an attempt to provide immediate protection from Inheritance tax (IHT), as well as maintenance of access to and control over assets.
How do these products work?
IHT does not apply to BPR qualified assets, although this qualification period can take up to two years. Should an investor die during this time, IHT still applies to those assets. An accelerated Inheritance Tax Solution aims to offer peace of mind for individuals and will generally include a Lloyds of London syndicate insurance policy. This policy covers the two-year gap period which the BPR would otherwise take to exempt said assets from IHT.
What happens on death?
The proceeds pay out some of the initial investment to the beneficiary named, which can be used to offset any IHT, should death have occurred during the first two years. Following this two-year period, BPR should apply to the assets in question meaning they are no longer liable for IHT.
What do we think?
Anyone with a single estate valued at £325,000, or a joint estate of £650,000 should look to mitigate their IHT risk. However, these types of insurance policy can be expensive and proper advice should be taken about them. There are lots of insurance products available and many people choose whole of life policies as an alternative to cover their IHT liability. You should see an independent financial advisor to talk through your options.