Gift Inter Vivos
A Gift Inter Vivos (GIV) plan is a niche form of term assurance.
It is normally taken out for a period of 7 years to cover an anticipated inheritance tax (IHT) liability on death following a gift made during a person’s lifetime to another person; a Potentially Exempt Transfer (PET). If death occurs within the specified period, a liability may arise if it is over the nil-rate band. After 7 years the gift falls out of the estate.
The amount of inheritance tax liability decreases by percentages over time and the GIV policy matches these.
We recommend that the policy is placed into a suitable trust. This will ensure that the benefits from a claim on the policy are not added into the donor’s estate, the need for probate is avoided and will paid to the beneficiaries quickly in order to settle the liability.
Calculating the liability on lifetime gifts can be a tricky and there are many pitfalls for the unwary, but doing it right and ensuring they are covered can really make a difference.
A whole-of-life policy can be taken out to cover an anticipated IHT liability whenever death occurs, and is therefore, considerably more expensive than a term insurance policy.
Whole-of-Life insurance written on a joint-life second death basis is often taken out by married couples or those in a civil partnership who cannot afford or don’t want to make gifts during their lifetime and their assets are now worth more than the transferable nil-rate band and any home residence allowances. On the first death assets can transfer to the survivor with an exemption from IHT. However, the survivor’s aggregated estate will be subject to IHT on their death. That’s why the benefits are arranged to be payable on second death.
The new generation of Whole-of-Life policies provide a guaranteed sum assured for the duration of the policy.
It is important to make the policy the subject of a Trust. This makes sure that the proceeds can be paid to the beneficiaries outside of the estate for IHT and the need probate is avoided. The beneficiaries can, in turn, use the proceeds of the policy to pay any IHT liability that becomes due.
How much cover?
With the type of policy decided, the next step is determining what level of cover to purchase. Our IHT Calculator can help identify how much tax could be due on your estate when you die.