Life insurance policy holders who don’t complete a simple form are leaving their families with an unnecessary inheritance tax (IHT) headache, according to NFU Mutual.
Under normal circumstances, the payout from a life insurance policy will form part of an individual’s estate and may be subject to inheritance tax.
However, by writing a life-insurance policy in trust – done simply by filling in a form from the insurer – the proceeds from the policy can be paid directly to beneficiaries rather than an individual’s estate, meaning it will not be taken into account when inheritance tax is calculated and monies can be paid out quickly by trustees.
Sean McCann, chartered financial planner at NFU Mutual, said: “The prospect of paying inheritance tax on a life insurance policy is all too frequently a nasty surprise for thousands of bereaved families.
“Thankfully, remedying the situation couldn’t be simpler – by contacting their provider and completing a trust form, policyholders can potentially remove the threat of their loved ones facing a costly IHT bill.”