A Guide To INHERITANCE TAX - St James's Place

Pensions and life assurance
Pensions and life assurance plans can also be of great
benefit in reducing an IHT liability. Death benefits in
modern pension plans are broadly exempt from IHT and
provide retirement income for the spouse or civil partner.
Whilst investment in a pension is therefore an indirect
method of mitigating IHT, it is crucial that the supporting
trusts are in place for funds to pass to the beneficiary.
Life assurance plans are uniquely placed to provide a taxfree
cash sum to meet any IHT liability, but because they
may also form part of your estate or that of your survivor,
they should normally be written in trust. Under these
circumstances contributions to the life assurance plan
will be transfers of value, but will generally fall within
the normal expenditure out of income exemption or the
annual exemption.