Royal London has introduced a joint life second death life cover option, in order to assist clients with their estate planning and inheritance tax (IHT) mitigation.
The option is available on Royal London’s Personal Menu Plan and is designed to offer an economically viable alternative to whole of life cover for those with potential IHT liabilities.
PAYOUT
Joint life second death provides a payout on the second person covered if they die or are diagnosed with a terminal illness, during the term of the cover up to age 90.
The option is already provided within Royal London’s whole of life plan and is now available on its term life cover.
“COST-EFFECTIVE”
Royal London claims that joint life second death gives advisers more options for IHT planning and that it can be seen as a more cost-effective alternative to whole of life insurance.
The insurer says the option appeals to the growing number of clients who need to manage their IHT liabilities, including affluent and high-net-worth individuals over 40 years of age who generally possess substantial assets but have limited liquidity.
GIFTED ASSETS
The cover also features a valuable gifting option, enabling assets given to the family during the individual’s lifetime to be protected. Individuals can make lifetime gifts, carving out a portion of the sum assured with a separate gift inter vivos policy to insure against the cost tof them dying within seven years of the gift, after which the asset passes tax-free.
here is no need for medical re-underwriting when using the gifting option.
IHT TO HIT MORE ESTATES
Royal London believes that rising house prices and frozen tax thresholds, together with the decision to include pensions and pension death-in-service benefits within estates for IHT from April 2027, will mean more estates will fall into the taxable bracket for IHT, unless action is taken.
The Office for Budget Responsibility (OBR) estimated that the proportion of deaths subject to IHT is likely to increase to nearly one in 10 by the end of the decade. These factors are likely to push up the demand for IHT planning, the insurer said.
“life insurance policies will become more popular for those facing large [IHT] liabilities”
Jennifer Gilchrist, protection spokesperson at Royal London, said: “The subject of inheritance tax has found itself in the spotlight recently. It will continue to be a focus for advisers and their clients as the application of inheritance tax to pensions and business and agricultural property, as announced in the Budget, challenges the financial planning mindset and leads to a radical re-think for estate planning.
“Over time, more and more people could face a liability when passing on assets to their next of kin. It also means that life insurance policies will become more popular for those facing large liabilities. Incorporating life insurance into estate planning allows clients to ensure assets are managed according to their wishes.
“While some of the changes won’t impact until April 2026 and beyond, our new proposition is coming at the right time, helping to assist advisers reviewing existing clients’ circumstances and filling any gaps in their existing provisions. Additionally, it may provide opportunities to attract new clients with the expansion of the target market interested in this type of cover.”
