Life assurance and tax
When taking out life assurance you should be aware of the tax implications when the inevitable time comes for your policy to mature.
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Life assurance and tax
Life assurance payouts and tax can be a confusing topic – as tax often is – but the information below should shed some light on the subject.
Life assurance payout
As far as personal income tax is concerned the payout is free of tax deductions. This can come as some comfort to individuals who may be teetering on the edge of a higher tax bracket.
Life assurance liabilities
However, the life assurance payout is considered to be part of the deceased’s estate which could have tax implications. For instance; if the life assurance payout pushes the total for the estate over the ‘tax free’ threshold then the whole estate would be liable for inheritance tax.
Life assurance in Trust
To avoid the above scenario you should consider placing the policy in Trust – this separates the payout from the estate, thereby avoiding or reducing the tax burden. This method of avoiding inheritance tax also has another benefit – quicker payout. Payouts from an estate can be tied up for months in probate – whereas the trustees will be able to award payouts from the life assurance to beneficiaries almost immediately upon death.
The payout from a life assurance policy under trust has another beneficial attribute – it can be used to pay the inheritance bill for the rest of the estate – thereby releasing the funds.
Placing a life assurance policy into Trust is complex to say he least and a financial advisor should be sought out before proceeding.
Hopefully the information above will be somewhat helpful when deciding on the best route to take when considering life assurance and inheritance tax.
Choosing life assurance cover
With a plethora of life assurance policies to choose from online it is often difficult to know which one to pick. Established in 1995; Jump Money have been helping people like you protect their family’s financial security should the unexpected happen for over a decade. For more information on their great range of products and services why not give one of Jump Money friendly staff a call on: 0845 8516262. Or alternatively take a look at the website at: www.jumplifeinsurance.co.uk for a life assurance cover online.
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