Whole of Life Insurance
Whole-of-life insurance can play a key role in estate and inheritance tax planning, providing a guaranteed sum assured that can help beneficiaries meet future liabilities or preserve family assets for generations to come.
Why This Matters Now
- With frozen IHT thresholds, rising estate values and the proposed inclusion of pension assets in IHT from 2027, the potential tax liability facing many families is growing.
- Whole-of-life cover arranged now locks in premiums based on current age and health. Waiting increases cost and reduces insurability.
- Placing a policy in trust today ensures it is correctly structured before any deterioration in health that could complicate future arrangements.
What is Whole of Life Insurance?
Whole of life insurance is a type of life cover designed to last for your entire lifetime, rather than a fixed term. As long as premiums are maintained in line with the policy terms, a payment will be made on death, whenever it occurs. It is most commonly used in estate planning to help beneficiaries meet inheritance tax liabilities without having to sell family assets.
Key Facts
- Unlike term assurance, whole-of-life cover does not expire. It pays out upon death, provided premiums are maintained.
- Whole-of-life policies have no cash value at any time. They are not savings or investment products.
- Premiums can be structured as reviewable or guaranteed. Reviewable premiums may change over time; guaranteed premiums remain fixed.
- Placing a whole-of-life policy in trust keeps the proceeds outside your estate for IHT purposes and allows them to be paid directly to beneficiaries, avoiding probate delays.
- Couples commonly use joint life second death policies to cover the IHT liability that arises when both partners have died, and assets pass to the next generation.
Who is This For?
- Individuals who want to provide a guaranteed lump sum on death often do so to help meet an expected inheritance tax liability.
- Couples who wish to ensure that beneficiaries can retain key family assets, such as a home or business, without needing to sell them to fund a tax bill.
- People looking to ring-fence a specific sum for family or charitable purposes as part of a planned legacy.
- Business owners or shareholders where a known liability will crystallise on death and needs to be covered by a guaranteed payout.
What This Service Aims to Achieve
- Assess whether whole-of-life cover is appropriate for your objectives, health status, and overall estate plan.
- Determine an appropriate level of cover and premium structure.
- Structure the policy correctly, typically via an appropriate trust, so that benefits are paid efficiently to the right people outside the estate.
- Integrate whole-of-life cover into your wider estate and financial planning so it works alongside gifting, trusts, and other strategies.
Our Whole of Life Planning Process
Clarifying the Objective
We identify the need you are trying to meet, for example, covering a potential IHT liability or providing a guaranteed legacy, and how this fits within your overall estate and financial plan.
Assessing Affordability and Product Options
We consider the cost, underwriting requirements and different premium structures, and explain how changes in circumstances or health could affect the policy over time. We compare options across the market to identify the most appropriate solution.
Structuring Ownership and Beneficiaries
We typically recommend that whole-of-life policies used for estate planning purposes be placed in an appropriate trust. This helps ensure that the proceeds are paid quickly to the intended beneficiaries and, where possible, kept outside your taxable estate.
Reviewing Alongside Your Estate Plan
We review cover periodically to ensure the level of protection remains appropriate as your wealth, objectives and legislative environment change. This is particularly important given the proposed changes to pension IHT treatment and business property relief.
Frequently Asked Questions
Is whole-of-life insurance only for inheritance tax?
It is most commonly used for estate planning, but it can also be used to provide for dependents, equalise inheritances between beneficiaries, or create a specific charitable or family legacy.
Is the whole of life always the best way to address an IHT liability?
Why does the trust structure matter?
Important Information
Whole-of-life policies have no cash value at any time and will cease if premiums are not maintained in line with the policy terms. The tax treatment of life assurance and trusts depends on individual circumstances and may change. Ark Wealth Management is an Appointed Representative of Quilter Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority. Estate planning and trust arrangements involve legal considerations; specialist legal advice is recommended.