Too many people are still failing to put life insurance policies under trusts to avoid inheritance tax, says Skandia.
Any assets over the nil rate band, currently £300,000, that are not in trust could be subject to IHT at 40%.
Skandia says there are typically no additional costs to writing the policy in a trust when buying a product.
Colin Jelley, head of tax and financial planning at Skandia, says: “They key aspect is the general lack of understanding of this amongst consumers, which underlines the value of advice.
“This is bread and butter stuff for most advisers. There’s certainly a potential issue that consumers are doing direct pro business without necessarily getting the advice they need.”
Almost £1bn could be subject to IHT this year by failing to write life insurance policies in trust, says Skandia.
In 2003 to 2004 Her Majesty’s Revenue & Customs (HMRC) potentially taxed 10,996 insurance policies worth £597m. Skandia estimates the figure could have grown to £960m in the 2007 to 2008 tax year if the value of life insurance policies potentially liable to IHT had continued to increase at the same pace as in previous years.
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