Malcolm Finney looks at how life policies may be used for inheritance tax planning.
Life policies can be very attractive due to their various uses. For example, a life policy can be used to effect a payout on death. It can also be used to help discharge an inheritance tax (IHT) liability (e.g., with respect to a failed potentially exempt transfer (PET)). A life policy can also be used as a pure investment.
Qualifying vs non-qualifying life policy
A life policy is categorised as a ‘qualifying’ policy or a ‘non-qualifying’ policy. Qualifying policies do not precipitate chargeable event gains, which is not the case for non-qualifying policies.
A chargeable event gain, where applicable, gives rise to income tax charges, not capital gains tax (CGT). This has unfortunate
