Why Set up a Lifetime Trust?

Why Set up a Lifetime Trust?

This blog explains why it is so beneficial to have a Lifetime Trust instead of a Will Trust.

Why do Solicitors Usually recommend a Will Trust?

Usually, a Will Trust is set up and created by a Will and is usually a Discretionary Trust. The benefit of this is that it means the person’s entire assets fall into the Trust as opposed to going directly to their beneficiaries on death. The Trust will typically last 125 years from inception. Here, the Trust can make loans from the Trust to the beneficiary. This will protect the assets, for example, in the event that your child gets divorced.

What is the Difference Between Will Trusts and Lifetime Trusts?

Both types of Trusts are Discretionary Trusts. However, the main difference is that a Will Trust is set up on death and the Settlement (items that go into the Trust) are the assets that are left on death. By contrast, Lifetime Trusts are set up during lifetime, and the Settlement occurs immediately. The Settlement can be as little as £10, and the rest of the assets pass into the Trust upon death.

A Lifetime Trust allows you to gift assets during your lifetime. Rather than giving money directly to your children, which contains the risk of losing half the money in a divorce scenario, the Trust will lend the money to your children which means that the assets are protected.

Downsizing Your Home

You could decide to downsize your house so that you would have money in your late seventies to gift out to your children. Here, with a Lifetime Trust, if you were to live for seven years after making a gift into Trust, you could then use your nil-rate band allowance more than once.

Deathbed Planning

Lifetime Trusts also have another advantage which is particularly useful for the wealthy. Imagine that your spouse has already died and you are suddenly taken very ill. As the Trust already exists, you can gift some money into the Trust immediately. If, as a result of this, the estate value drops below £2 million, that means that the residential nil-rate band is fully available. This would up to £140,000 in Inheritance Tax. So although that death bed gift would fail as gift into a Trust for Inheritance Tax purposes, it would still reinstate the residential nil-rate band, thus saving Inheritance tax.


The main advantage of using a Lifetime Trust is that it uses the existing rules. This means that you know and understand what the rules are when you place your £10 in. This also means that if you create a Trust during your lifetime, you have a much higher level of certainty on the rules applied than one created upon your death which could be 20 years later (allowing time for the rules to change).

Like all matters related to Estate Planning and Inheritance Tax, experienced advice is essential.

Call us if you require any help.

Read More

How Does the 7 Year Inheritance Tax Rule Work?

How Does the 7 Year Inheritance Tax Rule Work?

This blog explains some of the complicated rules around Inheritance Tax, including Taper Relief and the seven-year rule. It’s very important that you understand these rules and how they work because if you get them wrong, it could cost you a lot of money.

The Seven Year Rule

This rule only applies to gifts that are made in excess of £3000. If the gifts that you make exceed £3000 in any given year, then it will become a Potentially Exempt Transfer (PET) or a Chargeable Lifetime Transfer (CLT). PETs apply to direct gifts to people that exceed £3000 whereas CLTs are gifts into Trusts.

Potentially Exempt Transfers

PETs have no limit. If you wanted to give away £10 million, you could, and if you live for seven years after this, then this will fall outside of your estate. However, you need to be careful. If you gift large amounts to your children directly and they go bankrupt or get divorced, you would have no control over the gifted money, and as a result, it could leave the family bloodline.

Chargeable Lifetime Transfers.

CLTs are gifts into Trust, and they too have no limit. Yet, if you gift more than the Nil Rate Band (currently £325,000) then the excess will be charged at 20% immediately.

Taper Relief

If you make a gift into a PET, then Taper Relief might apply. Taper Relief is a tax reducer. It doesn’t reduce the amount of capital transfer for Inheritance Tax, it reduces the tax payable. It is important to know that Taper Relief only applies to the excess of gifts which exceed over £325,000. For example, if you gift £525,000, then Taper Relief would only apply to the excess £200,000.

The below ‘Taper Relief: Sliding Scales’ is a handy diagram showing the differing tax rates that apply. For example, the diagram illustrates how Taper Relief only starts after three years. You can use the diagram to see how the amount of excess that you’re gifting corresponds to the Taper Relief rules.

Time between date of
gift and date of donor’s
Taper relief applied to tax dueEffective rate on gift
0 to 3 Years0%40%
3 to 4 Years20%32%
4 to 5 Years40%24%
5 to 6 Years60%16%
6 to 7 Years80%8%

The Seven Year Rule and Fourteen Year Rule in More Detail

Let’s say that you make a PET in year one and you lived over seven years. Here, the money would be out of your estate after the seven years, and you would pay no tax. Now imagine you make another gift in year six and you lived for over seven years after that. Even though the two gifts overlap, there would be no issue as each PET is accounted for individually for tax purposes.

However, the rules are different for CLTs. If you made a CLT in year one and lived past the seven-year mark, again, there would be no issue as the money would be out of your estate. However, if you were to make another CLT in year 6 and then only lived another 6 years then the second gift would be a failed CLT and, as the CLTs overlapped, the money would be dragged back into your estate. You would, however, still get Taper Relief (depending on how many years you lived).

Therefore, after you have made a gift into a Trust, do not make any other giftsover £3000 in the seven years that follow.

Like all matters related to Estate Planning and Inheritance Tax, experienced advice is essential.

Call us if you require any help.

Read More

Easy guide to probate

What is probate?

Everything a person owns; their possessions, money and property make up their estate. When this person dies, the estate must be distributed according to their Will, if it exists. Applying for the legal right to perform the distribution is called probate.

Probate is granted to the person(s) named the executor (s) in the Will, with authority from the court. An executor is a person the deceased wished to deal with the administration of their estate after their death. It is the executor’s responsibility to:

  • determine what property and other assets you owned, as well as your liabilities
  • arrange for current valuations of your personal possessions, property, investments, any pension or insurance entitlements due and also any debts and bills
  • arrange for the payment of your funeral
  • establish Income Tax, Capital Gains Tax and Inheritance Tax liabilities and complete the necessary tax returns to submit to the Revenue
  • complete and submit the necessary Probate Registry forms
  • arrange the clearance and sale of any property
  • collect assets and pay any debts
  • arrange for the distribution of legacies and gifts to your beneficiaries
  • compile detailed accounts to give to the main beneficiaries
  • in the case of minor children being beneficiaries, then your executor may act as Trustee for ongoing trusts, to hold their monies until they reach 18.

In Scotland, probate is known as Confirmation, however the process remains similar.

This guide aims to provide a basic understanding of what happens and what needs to be done if you are named an executor.

Do you need probate?

This depends on the deceased’s circumstances, but many people do not. Relevant factors include:

  • Whether any accounts or properties are jointly owned – if they are, then it usually just passes onto the surviving co-owner
  • The value of the estate – some institutions may let estates valued at less than £5000 pass on without sight of a Grant of Probate, however it is worth checking with the provider

If there is a property which is NOT jointly owned, then probate is always required.

HMRC will be able to advise on whether Probate is necessary

Who should apply, and for what?

Not everyone can apply for the legal right to handle the estate. The process depends on whether a certified Will has been produced, and if that Will names an executor to deal with the contents. The executor could be anyone over the age of 18 and is often a family member or a firm of Solicitors. It is not uncommon for an executor to be a beneficiary.

 There are three options depending on the situation:

  • If a Will exists AND names a competent executor, then that person must get a court-ordered ‘Grant of Probate’.*
  • If there is no Will, then they must apply for a ‘Letter of Administration’.
    • Only the Spouse (even if separated), civil partner or child may apply.
    • In this case, the rules of intestacy apply.
  • Sometimes a Will either does not deal with the full estate or name an executor. There may also be reasons such as health or mental competency that mean the named executor is unable to act. In a case like this administration is required again.

*The named executor is not obliged to act – it is possible to renounce the role or reserve power for future use, often when the situation is easier to manage (such as if the executor is abroad).

So long as you are able to apply and unless the estate is very complex, probate is absolutely a process which can be done alone. People waste large amounts of money getting solicitors to do it for them. It does take time and effort, but many people find it a welcome distraction from the situation that they find themselves in.

How long does it take?

It normally takes between one and two months to file for, and then receive a Grant of Probate. After this, it can take significantly longer to perform the actual distribution, particularly if the estate is large or complex. The main piece of advice we can give while applying is to be organised and prepared. So long as you keep good records at each stage, it will be an easy experience.

We can prepare the necessary paper within five working days of receiving the full information from the executor or Administrator. We are also able to obtain the grant in as few as ten working days.

You have been named executor, what should you do?

1.Register the death and find the Will

This needs to be done within five days of death and is usually performed by a family member. Locate your nearest registry office online and phone ahead in case you require an appointment.

  • You will need the correct documentation of a medical cause of death certificate and then other documentation such as a birth certificate.

It is wise to buy several copies (we suggest at least 5) of the death certificate as they are useful later and increase in price based on time after death. Initially, it costs between £8-12 per copy based on which one of the home nations the death occurs in. (£11 in England)

  • The certificates are needed for the assets such as bank or credit card accounts.

The location of the Will should have been made known by the deceased before death, e.g. with a solicitor or at their house.

  • If there is no Will, then the deceased has died ‘interstate’. At this point, certain rules apply.

2. Report the death

Using the death certificates, report the death to any of the asset holders such as banks or building societies.

This can often be done in one go using the Death notification service. You do not have to create an account, though it is advised as they can provide updates on the progress of the application.

  • Institutions are usually notified by 4 PM the next working day if you submit before 12 noon.

3. The funeral

Family members normally arrange this.

The Will may have set aside money to provide for the event, but if not, then the family and/or executor may find themselves paying BEFORE they are able to retrieve any assets.

4. Perform a valuation of all the assets and assess finances

This can be done alone, but some areas may require professional services based on the items that are being valued.

  • Examples could include art or jewellery.
  • Houses can be valued by the executor, but if the price begins to stray close to the Inheritance Tax (IHT) threshold of £325,000 then it is better to have it done professionally.

You will need to contact a variety of institutions such as:

  • Banks for accounts and cash assets. Make sure that details of all accounts, investments and ISAs are included. Check whether the accounts are joint or single as this will affect the valuation.
  • Lenders in relation to mortgages, loans, or credit cards
  • Pension providers
  • Various government offices to check for outstanding tax payments (council, income ect…) which will have to be settled BEFORE anyone named can receive anything from the Will.

The institutions may require a death certificate to stop any payments and you should also check that any protection or insurance policies do not lapse after death.

When it comes to life insurance, you should also check for any policies that you can start the process of claiming on at this point.

  • Sensible management would have put these into Trust. If so, then they can be accessed without probate. Bluebond specialises in dealing with estate planning via the use of trusts.
  • If it has not been put into Trust then the policy forms part of the estate and must be included in the valuation.

5. Obtain the Grant of Probate (or Administration) and pay Inheritance Tax

Inheritance Tax forms 205 or 400 (IHT205/400)

Watch our video on Inheritance Tax to see how we can help!

Before you submit a Grant of Probate application, forms must be submitted to see if the deceased is liable to pay Inheritance Tax.

  • If there is any tax to pay, there is a 6-month window from the point of death to in which to pay.
  • A Grant of Probate will not be given if the tax is not paid.

There is a £325,000 allowance which is tax-exempt, alongside a possible further £175,000 allowance depending on the individual’s circumstances. Using the previously performed valuation, one of two forms needs to be filled out based on whether the estate falls above or below the taxable boundary:

  • Use form IHT205 if the valuation indicated an estate of LESS THAN £325,000
  • If it is valued at greater than the threshold then you must instead fill out form IHT400

Either form can be filled out on paper or online and should list:

  • All valued assets
  • Any gifts made by the deceased less than 7 years before their death (after 7 years these gifts become tax exempt)

Fill out the form EVEN IF THERE IS NO TAX TO PAY.

IHT must be paid in advance. This is easy if there is enough money in the deceased’s bank accounts – all the banks need is an IH423 form. It gets more complex if items such as property must be sold.

  • Often the executors may have to initially pay out of their own pocket or get a loan before they can recoup the money from the estate


Once any IHT issues have been sorted, the executor (s) must complete a Probate Application form (PA1P) which can be downloaded and submitted online. (Google: ‘apply for probate’ and select the first .gov option)

  • The executor will need an original copy, no photocopies, of the Will.
    • If multiple versions exist then only the most recent may be used, but previous versions should not be destroyed at least until probate is granted.
  • If there is more than one executor, then the group must work out who applies. Up to 4 executors can be named on an application.
  • For further help, the government operates a helpline on 0300 123 1072.

The process costs £155 with a solicitor, or £215 if applying by oneself, regardless of the size of the estate.

  • The fee is waived below £5,000
  • At least 5 extra copies should be ordered for £1.50 each, as they are vital to the process

The application will only be successful if the relevant Inheritance Tax forms have been submitted (see below) and any resulting tax is paid. Once successful, a notice should be placed in The Gazette to encourage other creditors to come forward, otherwise the beneficiaries may be liable.

In total, the following must be submitted to the Probate Registry/HMRC:

  • PA1P form
  • IHT205 or 400 form
  • An official death certificate
  • The original Will and three copies
  • The fee

6. Pay of any debts

If the deceased had any other debts besides IHT, then these must be paid off before the remaining estate can be distributed.

  • Only the estate is liable for these debts, not the family.
  • There is a complex order in which they must be paid which becomes relevant if the estate is not large enough to cover everything.

A notice should be placed in The Gazette to encourage other creditors to come forward, otherwise, the beneficiaries may be liable.

  • At least two months must pass before the estate is distributed before this rule takes effect

Debts in a joint name become the responsibility of the survivor of the pair.

7.Distribute the contents of the estate in accordance the Will

So long as you know the value of the remaining assets, they can now be divided in accordance with the Will.

Key words

Probate – the process of applying for the right to deal with someone’s estate after they die.

Executor – someone who is able to apply for probate, as they are named executor in the Will.

Estate – all a person’s available possessions and assets (money, property ect..)

Beneficiary – a party (e.g. a relative) who will gain assets from the Will

Grant of Probate – the legal authority granted by a court, allowing an executor to settle and distribute the estate in accordance with the Will

Grant of Letters of Administration – the path taken by a relation if there is no Will, or it is incomplete

Death certificate – a signed and certified document proving the death of an individual

The Gazeette – the Government website of the official public record for announcing deaths

IHT – Inheritance Tax

PA1P – the form that must be filled out in order to apply for probate, along with the associated fee

IHT400 – the online form for declaring assets to HMRC to see if there is any IHT due

IHT423 – the form that can be sent to institutions such as banks to authorise payment to creditors and HMRC out of the deceased’s accounts

Read More

Why you should use a Family Investment Company to avoid Inheritance Tax on Large Estates

Why you should use a Family Investment Company to avoid Inheritance Tax on Large Estates

This article explains all the benefits that accompany using Family Investment Companies (FICs). An FIC may be a beneficial solution to your Inheritance Tax problem if your estate exceeds £2million in value.

What is an FIC?

An FIC is a company with bespoke Articles of Association and multiple share classes. They are usually limited, but can be unlimited if it is only investments that are held in the company and not property. FICs are set up by tax specialist tax consultants together with lawyers. They are most often used by people who have large property portfolios.

How Does the Process Work?

Usually, a registered partnership is set up between spouses (rather than you filing your tax returns individually). After three years, the partnership is incorporated, and properties are placed into the company using Incorporation Relief to avoid Capital Gains Tax (CGT). This method is also useful for clients withlarge investment portfolios with potential large CGT issues. Here, shares are gifted as fast as possible into the company to avoid CGT.

How is an FIC Set up?

The people gifting the money into the company will generally have A-class shares. When they gift the money into the company, it is offset on the balance sheet as a Director’s loan. The people setting it up become Directors and retain control. The Director’s loan is then repaid over the years income tax free as it is classed as a return of capital. It is the normal income from property portfolio thatrepays the Director’s loan. Corporation Tax is payable on profit, but at 19% it is lower than Income Tax.

Usually, when you reach the age of around 75-78, a Director’s loan is given up asa Potentially Exempt Transfer (PET) and therefore avoids Inheritance Tax if it survives the seven-year period. Corporation Tax is payable – but only at 19%. As it is a company, Section 24 on Buy To Let properties does not apply, and as a result, all interest is offset against profits (not just the 20%). You can also get paid an income as Directors.

You would only own the A shares. Usually, your children would have the B and C shares which would also grow in value in line with the company’s property or share portfolio. This stops the Inheritance Tax from getting worse.

Despite having shares, your children would not be Directors so you continue to control the company until old age. Here, there is an added benefit that only direct descendants can own shares which provides protection (for example, if one of your children was to get divorced).

FICs are particularly beneficial for people whose estates exceed £2million (or people with assets that exceed £1 million excluding their main residence). They are a good way of potentially eliminating Inheritance Tax on large estates. However, there is the risk of future attacks by changes to legislation HMRC,meaning that you should not solely rely on this mechanism. FICs should always be set up alongside Trusts as retrospective changes to Trust legislation is very unlikely.

What are the Main Benefits of FICs?

  • You can avoid CGT normally payable on passing a property portfolio into a company if done correctly.
  • It can generate very low levels of Income Tax.
  • It avoids Inheritance Tax on very large assets.
  • It retains complete control on assets and income streams.

What are the Negatives of This Strategy?

  • FICs do have the potential to be attacked in the future by HMRC. This is the main negative of using FICs.
  • If your income is based upon property income, then this can be inflexible.
  • You will have Accountancy fees that you need to manage annually.


It is very wise to not rely only on FICs. You should always consider the use of maximum investment into Trusts as well. Alternatively, you could invest some money into Business Relief plans.

You should always place the maximum amount possible into Trusts because this provides huge backup assets should you need them (for example if you went intocare). Also, this may be necessary if you find yourself giving away your property portfolio given that your main income from an FIC stops at age 78.

However, this can sometimes be a difficult concept for property landlords who feel comfortable having all their money in property. Your return may be lower, but it will have a higher level of certainty as you avoid IHT and you have capital/income back up.

In Summary

FICs are good for people with large estates as there are few other options. It alsooffers protection as large gifts to children could be lost in scenarios such as divorce. However, to give yourself the highest level of protection, you should always use maximum investments into Trust. Together, this means that you get certainty on IHT avoidance.

Like all matters related to Estate Planning and Inheritance Tax, experienced advice is essential.

Call us if you require any help.

Read More

What is an Inheritance Tax Trust

What is an Inheritance Tax Trust?

In this blog, I will be explaining what a trust is, how to set up a trust, and how they function in general.

What is a Trust?

A trust is a separate legal entity. This means that it exists separately in English law in the same way that each person is treated separately for tax purposes. A trust functions to ensure that you, or someone you choose, can retain control of your assets.

There are many different types of trusts: you can write trusts into your will or you can create lifetime trusts which are set up during someone’s lifetime. 

A good analogy is viewing a trust as a strongbox which is made by lawyers, with more complex and better strongboxes requiring better lawyers. A person called the settlor puts the assets into the box.  These assets can then be ‘locked away’ until they are used for the benefit of the beneficiaries.  However, the trustees keep the keys and have control of the assets.

How do you Create a Trust?

A trust must be written out properly which is why good lawyers are essential. Here, Bluebond uses some of the best lawyers in the country to ensure this occurs.

There are four main parts to a trust:

  1. The settlor – This is the person who often has an inheritance tax problem places the assets into a trust to remove them from his/her estate. This can happen during the settlor’s lifetime or upon their death (depending on the type of trust).
  2. The trustees – These are the people who control the trust and usually happen to be the settlors and their adult children.
  3. The beneficiaries – The beneficiaries are the people who benefit from the trust assets and the income that they generate. They are usually the adult children and grandchildren.
  4. The settlement – This is the amount placed into the trust which can range from as little as £10 to much larger amounts. Placing the £10 into the trust ensure it exists immediately and is called a lifetime pilot trust.

Will Trusts and Lifetime Trusts

Assets that are gifted are better protected when gifted into a trust than when given directly to people, for example, to children. If you set up a trust within your Will, the settlement will not take place until you die as only then will they trust come into existence and the assets go into the trust.  For this reason, we prefer lifetime trusts where the assets are gifted during the lifetime, even though Will Trusts can be cheaper to set up.  In addition, lifetime trusts can be especially useful for people with big inheritance tax problems.

Trusts Compared to Limited Companies

A trust can also be thought of as similar to a limited company where the trust settlors are equivalent to the people who set the company, the trustees are equivalent to the directors of the company, and the beneficiaries equivalent to the company shareholders.  Also, like trusts, limited companies are taxed differently to individuals in the UK.

Complex Rules on Tax

Trusts have complex rules, especially on tax. There are initial charges when money is put in and a limit of £325,000 currently in 2020 to the amount that can go in without an immediate tax charge of 20%. Moreover, every 10 years there can be an income tax charge on the trustees called a ‘periodic charge.’ The capital gains tax charge will also be different.  Essentially, the tax rules are different around trusts than they are for people or companies.

In Summary

Always get good advice from an experienced practitioner before setting up a trust.  There are many different types of trusts to suit different people and their needs. For example, a flexible reversionary trust enables you to put money in and then get it back over a period of time should you wish to.  If you do not want it back, it stays in the trust and after 7 years it is outside of your estate. 

Personally, I believe that lifetime trusts are the best option when compared to Will trusts

Like all matters related to inheritance tax experienced advice is essential.

Call us if you require any help.

Read More

Save £1000s of tax money using two insurances

How you can save money using 2 Insurances

This article explores how you can save thousands by simply having two whole life insurance plans rather than one.

When a person takes out life insurance for inheritance tax purposes, the default mechanism is a “Joint Life Second Death Whole of Life” plan.

Those who would prefer to watch a video about this – play this YouTube video. Subscribe to our Channel for more tips and information like this.

Joint Life Second Death Whole of Life Insurance

A Joint Life Second Death Whole Life Insurance policy is set up to pay on second death because inheritance tax is payable when the second person dies. So, this is not like purchasing a term life insurance policy for a set time period like a term life policy to cover your mortgage.

Joint Life Insurance is usually set up in such a way that it pays off when the first person dies during the life of the policy. It does work to settle the Inheritance tax as it ensures the money is available to pay the tax when the second insured person dies. However, you will find that these plans are quite expensive.

Once we came across a client who was paying about £600 per month into a Standard type whole of life policy while he was 52. Going at this rate for another 35 years or so could have cost him £252,000 over 35 years.

There are much better mechanisms available for you, such as using two plans, rather than one where you can save money.

The two types of plan are standard plans and maximum plans.

Standard Plan or Balanced Plan

A standard plan may be used to insure your retained assets, such as your main residence. Your home is not generally given away as you probably intend to remain living in it. If you did try and give it away while continuing living in it, this would cause tax problems for your children. 

Other retained assets could be your car, furniture, some antiques, or any other asset you want to retain. 

There are other assets, such as emergency funds. If your income stream matched or exceeded your expenditure, you would still need to keep a certain amount of money that you could get access to as your emergency fund. 

Now the calculation for this type of cover must be done properly.  You’ve got to look at those assets both for their current worth and how much it will likely grow over 20 – 30 years. Therefore, you’ve got to have an increasing value insurance plan in which the amount of coverage increases over time. Therefore, the premium will also increase over time. This requires a comprehensive calculation to get correct.

Maximum Plan

The other type of plan is called a Maximum plan which is set up differently to a standard or a balanced plan. The main reason to set up this plan is to cover your temporary assets. Assets that you intend to give away either directly or into trust such as shares, funds, property, etc.

If your income matches your expenditure, and if you’ve maintained a reasonable emergency fund, you may be able to start giving away some of your assets. Now, this could be done by directly giving them away to your children or else indirectly to trust, etc. Both methods allow you to take them out of your estate over time. This may take you anything from five years to 15 years to twenty years, and therefore you have to set up a maximum plan to cover you in case you both die during that period.

Let’s see how these two types of plans work for you. First, let’s have a look at the difference between a Standard Plan and a Maximum Plan.

Standard/ Balanced Plan

The premium of a standard plan consists of three key elements,

  1. Charges (Depends on the company)
  2. Life Cover
  3. Investments


Let’s say you’re trying to insure yourself and your retained assets will be worth a couple of million in 20 years of the time when you die. So you need to start with around £500,000 of cover. So, your properties and other assets are starting at £500,000, but it’s going to grow, and therefore you need an increasing cover over time. Your premium will also increase over time.

So, as you’ve got this life cover, what happens with the investment? Over time the investment will grow with the stock market. Let’s say it rounds up to about £800,000 depending on health and so many other things. The company would expect that investment to meet the value of the cover. The value of the plan will pay the expected IHT liability on the second death.

So, what happens if you both die early? 

If you die early, your children will get the value of your investment at that point, and they will also get the top up with the amount of insurance. Therefore, whatever the value is at that particular time hopefully covers your inheritance tax liability for those assets. 

This is expensive because of the investment element. Imagine that you’re trying to save up £500,000 over 20 years. You will have to put over £1000 pounds or £2000 pounds a month, depending on the figures. Therefore, these policies are expensive and that’s why you need to implement this system of two plans.

Maximum Plan

A Maximum plan consists of two key elements with Life Cover being nearly the whole value of the plan with a smaller portion of charges. The costly investment element has taken out.

Your cover will increase over time, your premium will also increase over time, but now you’ve got no investment. What happens here is the increasing premium goes up annually and every ten years it takes a massive jump.

Over time this monthly premium could double or triple and then in another ten years, it could quadruple again which leads to the point that it becomes unsustainable. Because in 20 years you will be paying about £10,000 pounds a month. However, you’ve covered yourself during a particular period by giving yourself time to gift away the assets from your estate in other methods such as putting them into trust, downsizing your property & give away some of the excess capital, etc.

Therefore, this maximum plan gives you time but at a much lower cost. Let’s just say that you are 60 years of age and, you may be paying £800 a month with a standard plan whereas you may only be paying £80 a month with a maximum plan. That’s is a huge difference.

Once you have given assets away and the 7-year rule has been applied, you can reduce or stop your maximum plan

Therefore, that timescale and this methodology save a considerable amount of money. 

The other thing that you’ve got to watch out for is the charges. If your adviser takes a commission on a plan, that commission could be thousands of pounds, which we don’t think is quite right as it will raise your monthly premiums considerably. So instead we charge a fee based on the plan, the risks, and the liability of advice. This is a flat fee with a very small additional cost depending on whether it’s a £2 million policy or a £1 million policy.

Generally, the savings, because you pay an upfront fee, is huge. Sometimes we’ve saved clients between £10,000 – £15,000 in terms of differences in the premiums over the terms of the policy. 


Setting up these two types of plans together makes sense since most people want to retain some assets. 

The differences in the cost per month are huge and with the second plan in place, it gives you time and the ability to give away your assets in a different format. 

Lastly, like all inheritance tax advice experienced advice is essential. Please call us for a free consultation if you need and help.

As a bonus, book a free Zoom call consultation with Charles de Lastic, MD of Bluebond Tax Planning today.

Read More