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Where Taxpayers and Advisers Meet

Insurance to cover potential IHT

Lindsay
Posts:1
Joined:Tue Dec 16, 2014 4:45 pm
Insurance to cover potential IHT

Postby Lindsay » Tue Dec 16, 2014 4:54 pm

When we moved into our new home 3 years ago, the purchase was funded by my father in law, a Guernsey resident. He set up a loan agreement with my husband (his son). The house purchase is in my husband's name. I was not allowed to be involved in any aspect of this in order to prevent me from any entitlement to a split of assets should our marriage fail.

My father in law says that it is his intention to "tear up" this agreement at a time he decides is appropriate.

My concern is that should anything happen to him prior to him tearing up the agreement, then this asset will become liable for inheritance tax as it is essentially a part of his estate. If that was the case then we would have to sell the house to pay it and would therefore lose our home

(I have a separate concern on my father in law's behalf that this may affect his status as a non dom as the house is essentially his - we do not repay any element of the loan to him - and therefore would be deemed to be a UK asset....however this cannot be my concern at this point as it is not my business to interfere in his affairs).

My question is whether anyone knows if it is possible to take out insurance to cover this risk so that my family (I have a young son) is protected in the event that my father in law was to die while this loan was still technically outstanding.

Any help would be appreciated!

LozaACCS
Posts:1504
Joined:Wed Aug 06, 2008 3:55 pm

Re: Insurance to cover potential IHT

Postby LozaACCS » Wed Dec 17, 2014 10:04 pm

To be chargeable to UK IHT your FIL would need to hold either a legal or beneficial interest in the property, he does not appear to have either so I do not believe an IHT liability exists on the property, (even if he holds a legal charge).

He does own a UK situs asset (a loan) and this would be chargeable in his death estate, he would however have a NRB of up to 325K to set against the Chargeable transfer on death.

Insurance products are available to provide for the IHT, personally I would steer clear of whole of life policies, they have a tendency to move the goal posts further down the line.


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