Further Uses of Life Assurance - Providing funds

When you make a will you appoint executors to look after your interests in the event of your death. The executors may be relatives or friends, or you can choose specialists, such as solicitors, banks, insurance companies or accountants. Before the executors can touch your estate, they must obtain clearance from the Probate Registry.

However, this cannot be granted until estate duty is paid in cash, together with interest charged from the date of death until the date of payment. Since the assets of the estate cannot be used to pay the duty, where can the money come from? This is a chicken-and-egg type of situation where we need the money but cannot touch the estate. One of the ways of providing the necessary funds is to buy a life assurance policy.

Gifts inter vivos: Specially designed policies providing temporary life assurance to cover the estate duty which would be payable if the donor should die within seven years after making a particular gift. The recipient takes out the policy on the donor's life and pays the premiums.

No tax relief is allowable on the premium (unless only husband and wife are involved), but the policy proceeds are free of duty and are paid immediately on death. With gifts inter-vivos policies, the sum assured at the beginning is the estate duty value of the gift, and this gradually decreases over the seven-year period as the estate-duty liability diminishes. The premiums are usually only payable for five or six years.

A whole-life policy: An ideal arrangement to provide money for estate duty on your death. A non-profit policy is suitable for the short term, but a with-profits policy has the advantage of increasing in value to provide for the greater duty you expect to pay as your estate increases in the future. If you can afford the higher premium, it is often better to buy a whole-life policy with limited premiums (payable for at least ten years to qualify for income-tax relief). You can then arrange for premiums to stop when you retire. Whatever method you choose, arrange to have the policy written under the Married Women's Property Act.


Providing funds

Payroll Giving
It’s all very easy to organise.
Just ask the Personnel or the Payroll Department at your company and, if they already have a scheme, they will give you the relevant forms.  HM Revenue & Customs’ website has a list of Payroll Giving agencies and explains payroll giving in more detail.

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read on: Further Uses of Life Assurance - Examples

When you make a will you appoint executors to look after your interests in the event of your death. The executors may be relatives or friends, or you can choose specialists, such as solicitors, banks, insurance companies or accountants. Before the executors can touch your estate, they must obtain clearance from the Probate Registry.

However, this cannot be granted until estate duty is paid in cash, together with interest charged from the date of death until the date of payment. Since the assets of the estate cannot be used to pay the duty, where can the money come from? This is a chicken-and-egg... see: Further Uses of Life Assurance - Examples