Quilter 15 Life assurance policies A life assurance policy can be used to pay an IHT liability as long as it is written under an appropriate trust. The trust means that the amount for which you are covered (the sum assured) does not form an asset of your estate. This ensures that your family has money to pay some or all of the IHT bill which arises, either as a result of being over the nil-rate band threshold or if IHT is due on a potentially exempt transfer (PET) or chargeable lifetime transfer (CLT), as described on page 13. If the life assurance policy is not written into trust, the sum assured will form part of your estate and the proceeds will therefore be liable to IHT. By writing your life assurance policy into trust, when you die the proceeds become payable to the trust. As the proceeds fall outside the estate, the trustees have access to them without having to wait for a grant of probate; this can ensure prompt payment to beneficiaries, if the trustees decide this is appropriate. Please note: premiums you pay into the policy once written in trust will be treated as PETs or CLTs unless they are otherwise exempt. (See page 11 for more information on the exemptions available.) Pension plans Your pension is one of the most tax-efficient ways of providing for your retirement. However, should you die before retirement your pension death benefits may form part of your estate for IHT if your pension is not under trust. Under most pension schemes, death benefits do not form part of the deceased’s estate and are normally free of IHT. This is because the pension scheme is already under trust and is administered by trustees or scheme administrators. In these cases, the trustees or scheme administrators have discretion regarding to whom death benefits are payable. This applies to: all occupational pension schemes including executive pension plans and small self-administered schemes. personal pension schemes including self-invested personal pensions established under trust. It is important that you keep the pension trustees/scheme administrators up to date regarding details of the people who you wish to receive the death benefits. Your financial adviser or scheme trustees/administrators should be able to confirm whether your pension death benefits are established under trust. Packaged solutions There are many product and trust solutions available to help you mitigate paying inheritance tax (IHT). The combination of a product such as an investment bond with a trust can offer significant tax savings and investment opportunities. Some of these solutions are described on the following pages. Please see your financial adviser who will be able to help you choose a solution suitable for your circumstances.