Arbuthnot Latham has highlighted how life assurance can help families cover inheritance tax liabilities while protecting property and other long-term assets from forced sale.
The bank outlined a case involving a couple in their mid-60s with an estate valued at £6.3 million, including property held through a limited company, cash reserves and existing trusts. Their potential inheritance tax liability was approximately £2 million.
Although the couple had already taken steps to manage their inheritance tax exposure and transfer future growth to their children, they had not made specific arrangements to fund the remaining tax bill.
Without sufficient liquid assets, their children could have been forced to sell property at an unfavourable time to meet the liability.
Arbuthnot Latham recommended £2 million of joint life, second death insurance, designed to pay out after the second partner’s death. The proceeds would provide funds to cover the inheritance tax liability, helping the family retain its property portfolio.
The cover was divided across four policies, allowing individual policies to be reduced or cancelled as the family’s circumstances changed. The policies were placed in discretionary trusts so that the proceeds could be paid to beneficiaries without forming part of the taxable estate.
Life assurance can provide a source of liquidity alongside existing estate planning arrangements. The appropriate level of cover will depend on the value and composition of the estate, the expected tax liability and the family’s wider financial circumstances.
Arbuthnot Banking Group PLC (LON:ARBB), operating as Arbuthnot Latham, offers private and commercial banking products and services in the United Kingdom. Established in 1833, Arbuthnot Banking is headquartered in London, United Kingdom.
