Whole of Life (estate planning)?
Discussion
Are there any whole of life policies out there that would be available to over 80's?
Just read that there's a £3,600 per annum (aggregate) premium limit but investing said amount would appear to produce an imediate prospective IHT saving of £1,440 (as the £3,600 would land outside of the estate if written in trust).
This sounds almost too good to be true - so there must be a catch..
Presumably with premiums invested in a unit-linked investment the value could go down but upon death, would the life company simply pay out 100% (or 101%?) of the unit value, or would there be other 'insurance' costs to be covered?
Just read that there's a £3,600 per annum (aggregate) premium limit but investing said amount would appear to produce an imediate prospective IHT saving of £1,440 (as the £3,600 would land outside of the estate if written in trust).
This sounds almost too good to be true - so there must be a catch..
Presumably with premiums invested in a unit-linked investment the value could go down but upon death, would the life company simply pay out 100% (or 101%?) of the unit value, or would there be other 'insurance' costs to be covered?
This is the aspect that I don’t understand about WOL when used for investment purposes…
Arguably, the policy holder pays the premiums (let’s ignore single-premium as that would be non-qualifying as I understand it) and the life company makes money based on the value invested over time.
Then on death, the life co simply pays out whatever the current value of the accumulated investment is (although this is sometimes expressed as 101% of something).
If it’s as simple as that (I’m guessing that it isn’t), then the life company cannot lose (ignore the last 1%) and the product is effectively just a straightforward investment into trust (but because within the modest £3,600 pa allowance, there’s no need to treat it as a CLT).
P.s. I’m certainly not talking about a situation where someone would like to pay £3,600 pa (for what will in all probability be a single-digit number of years) and expect that on death the payout will be let’s say £36k as clearly the odds would be heavily against the life company so I’m unclear how my scenario has much if anything to do with ‘insurance’.
Arguably, the policy holder pays the premiums (let’s ignore single-premium as that would be non-qualifying as I understand it) and the life company makes money based on the value invested over time.
Then on death, the life co simply pays out whatever the current value of the accumulated investment is (although this is sometimes expressed as 101% of something).
If it’s as simple as that (I’m guessing that it isn’t), then the life company cannot lose (ignore the last 1%) and the product is effectively just a straightforward investment into trust (but because within the modest £3,600 pa allowance, there’s no need to treat it as a CLT).
P.s. I’m certainly not talking about a situation where someone would like to pay £3,600 pa (for what will in all probability be a single-digit number of years) and expect that on death the payout will be let’s say £36k as clearly the odds would be heavily against the life company so I’m unclear how my scenario has much if anything to do with ‘insurance’.
Mogul said:
so I’m unclear how my scenario has much if anything to do with ‘insurance’
You are right - qualifying unit-linked "life insurance" policies are really investment contracts that takes advantage of the tax code to, for example, allow tax-free roll-up and 5% tax-free drawdown. There's not much insurance risk transfer, and the insurance company makes its money off asset management charges (as there is no spread).Gassing Station | Finance | Top of Page | What's New | My Stuff