Can Cannabis Smokers Get Life Insurance?
Question asked by Paul Ferris
I’m looking into buying Life Insurance for myself. As it will be my wife who receives the payout should I pass away, will she pay any tax on the benefit?
Here, we’ve got Drewberry’s Independent Protection Expert, Ben Brooks, to explain how Life Insurance policies are taxed. Just press play! 👇
When it comes to Life Insurance you wont pay any specific tax when purchasing premiums or when making a claim. However, it is important to understand that if a claim is made, the benefit amount may be subject to Inheritance Tax.
Inheritance Tax is a tax that you pay on your estate once you pass away. This includes things such as:
Currently you do get a IHT free allowance which is £325,000. So if your estate was less than £325,000 you wouldn’t pay anything on it. However anything over this amount would be subject to 40% IHT.
This can be avoided though if you write your Life Insurance Policy into wants known as a Trust.
By writing a Life Insurance policy into trust, the benefit amount stays outside of your estate. This means it isn’t included in your assets when you pass away and therefore, isn’t liable for Inheritance Tax (IHT).
Your loved ones will receive the full payout amount, which they can use as they see fit.
If your Life Insurance isn’t written into a trust, the tax rules are different. The benefit is liable for Inheritance Tax at the rate of 40% if the total assets are worth more than the individual’s IHT allowance.
40% is a significant percentage, so your loved ones will lose a large chunk of the benefit from your Life Insurance policy. This can have a big impact if there are debts that need to be paid off after your death, such as mortgage payments.
If you need any help setting up a Life Insurance policy or want to know more about writing a policy into trust, don’t hesitate to get in touch.
Our friendly team of experts are on hand to ensure you get the protection you and your loved ones need. Just pop us a call on [dynamic_name] or email help@drewberry.co.uk.