The policy that pays HMRC so the family doesn't have to sell
Why it matters
IHT is payable within six months of death. If the estate's value is locked in property, a business or land, the executors have three unattractive options: borrow, force a sale, or default on the deadline and pay interest.
Whole of Life cover written into trust bypasses all three. The policy pays out to the trust on death, and the trustees release the funds to the executors to pay HMRC. The estate stays intact.
How it works
A joint-life second-death Whole of Life policy is set up for a sum equal to the anticipated IHT liability. The policy is written into a discretionary trust from day one, so the payout does not enter the estate and is not itself subject to IHT. Premiums are typically paid from surplus income, qualifying as 'gifts out of normal expenditure' and therefore themselves outside the estate.
Who it suits
Couples in their 50s to early 70s in good health, with a clear IHT exposure that cannot be reduced without disrupting their life (a family home, a working farm, a going-concern business). Premiums rise sharply with age and health issues.
What's involved
This is regulated insurance advice. The introduction goes to an independently FCA-regulated adviser who underwrites the policy, arranges the trust, and confirms the sum assured against the actual estimated exposure.