Malcolm Finney looks at the use of life policies for investment and estate planning purposes.
The most basic use of a life policy for estate planning would be providing cover to protect against inheritance tax (IHT) charges arising on death or death arising within seven years of a lifetime gift.
Over the years, however, the use of life policies has significantly broadened, forming the basis of investments including insurance bonds, loan trusts, discounted gift plans and reversionary trusts.
English law requires the policyholder to have an ‘insurable interest’ in the life insured; but often, the amount of insurance when such policies are used for investment purposes is in fact de minimis (see the draft Insurance Interest Bill, not yet law).
Qualifying life policies
Despite death or maturity not qualifying as chargeable events and
