The sum assured decreases to mirror the Government’s IHT regulations and offsets the IHT liability on any gifts you have made, paying out a guaranteed, tax-free lump sum if you die during the policy term. The policy cannot be written on a joint life basis. The IHT bands that the policy is structured to pay out at are as follows:

Gift and Death     Charge Applied
1-3                           100
4                               80
5                               60
6                               40
7                               20

Notes (A gift is the transfer of an asset such as property or money etc from one person to another where no payment of any kind is given by the receiving person to the donor. Your estate is the total value of your possessions in whatever form they take.)

Under the inheritance tax rules no tax is immediately due when an gift is made during a donors life. However tax does become due if the donor dies within 7 years of the gift being made. The amount of tax is scaled down from the 4th year onwards.

The cover on a gift inter vivos term insurance is designed to provide a lump sum amount sufficient to pay the IHT due when a donor dies within 7 years of making a gift.

To achieve this the sum assured is set at the start of the policy to the amount of inheritance tax that would be due. It remains that level for 3 years and then reduces to 80% in the fourth year, 60% in the fifth year, 40% in the sixth year, and 20% in the seventh year.

The gift inter vivos life insurance therefore has term of 7 years and is a form of decreasing term life insurance. After the 7th year cover ceases at which point liability for IHT also ceases.

Gift -Inter-Vivos life insurance is a special kind of cover and to arrange it speak to a financial adviser. To find out more fill in the form below:

Unless it is written under trust, on death the proceeds of an ‘own-life’ policy will form part of your estate. If the policy is written under trust then the proceeds on death will not normally form part of your estate for Inheritance Tax purposes. Further information about writing policies under trust can be obtained from your Financial Adviser.

An ‘own-life’ Gift Inter Vivos policy should normally be written under trust. Please speak to your Financial Adviser about the tax implications this may have.

If you are insuring someone else then the proceeds of the plan will be payable to you as the policy owner, and not to the estate of the person you are insuring. The proceeds will then form partof your estate.

The tax treatment depends on your personal circumstances. All references to taxation are based on our understanding of current legislation and HM Revenue & Customs practice, which is subject to change.

It is a life assurance policy that provides a cash lump sum to cover a potential Inheritance Tax liability if the donor of a gift dies within seven years of making the gift.Premiums are fixed at the outset and will not change during the term of the policy. The term of the policy is 7 years. The cash lump sum that we would pay out on death goes down over the term of the plan as follows:

Policy year                % of Initial Cover

1                                    100%
2                                   100%
3                                   100%
4                                   80%
5                                   60%
6                                   40%
7                                   20%