Think of life insurance as a safety net for your family. It takes care of the practical things, from debt clearance to meeting funeral costs. It can even act as a future income source.

But there’s a snag!

If you’ve amassed assets over a certain limit, heavy taxation can gnaw at your life insurance, leaving less for your near and dear ones.

Inheritance tax can take a bite out of your estate, once your combined assets tip over the IHT thresholds Anything above the thresholds, and there’s a 40% tax waiting to be paid (unless you’re leaving it to a spouse or civil partner).

So, how can you make sure more of your hard-earned money stays with your loved ones?

Put Your Life Insurance into Trust!

By writing a life insurance policy in trust, the proceeds from the policy can be paid directly to the beneficiaries rather than to your legal estate and will therefore not be taken into account when inheritance tax is calculated.

Those with large estates may even want to consider an insurance policy written in trust, specifically to cover the cost of their inheritance tax liability.

Writing a policy in trust also means payment to your beneficiaries will probably be quicker, as the money will not go through probate.

Sadly, the reality is that only a small minority place their policies in trust. According to the insurer Aegon, only 6% of life insurance policies in the UK are set up in this way.

Don’t let the taxman take more than his fair share. It’s a very straightforward process and can help to protect your loved ones’ tomorrow.