NFU Mutual calls for life policies review to tackle 'unnecessary' IHT bill

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NFU Mutual has called for a review of life insurance policies to tackle high inheritance tax bills for bereaved families.

HM Revenue and Customs most recent break down of figures showed a £177m inheritance tax bill from life insurance policies in 2009/10.

Sean McCann, personal finance specialist at NFU Mutual, said the figures were completely unnecessary and life insurance policies should be written into trust.

He said: "Written into a trust will prevent a significant chunk going to the taxman. Otherwise, up to 40% of the pay-out could be claimed in inheritance tax. Trusts are really simple to set up and it shouldn't cost anything other than spending a little extra time to complete.

"To avoid paying tax unnecessarily, more people should take advice to reduce their effective tax rate. Up to 40% of life insurance pay-outs could be lost in tax. Just a few more minutes could save up to £35,000 from the average inheritance tax bill, according to the figures."

McCann said often policies were written many years ago and many people may have remarried or changed relationships but never reviewed their trust.

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