“Inheritance tax errors could be costing bereaved families up to £327 million, with nearly 7,000 families overpaying on life insurance payouts in 2021-22. Under HM Revenue and Customs rules, life insurance payouts are considered part of a deceased person’s estate unless placed in a trust, subjecting them to a 40% tax. Despite this hefty charge, many policyholders fail to secure their life insurance within a trust, leading to unexpected tax burdens on grieving families. Experts like Sean McCann from NFU Mutual emphasize the simplicity of putting a policy into a trust, which can prevent significant financial losses. However, it’s crucial to act promptly, as delays or placing a policy into a trust when seriously ill could still incur tax charges.”
Quotation by Nigel Holland
- Bereaved families may have overpaid inheritance tax by £327 million.
- 7,000 families paid a 40% tax on life insurance policies in 2021-22.
- Life insurance policies should be in a trust to avoid tax charges.
- Failing to act could result in significant financial losses for families.
- Putting a policy in trust is simple, but timing is crucial.