Summary

With this years budget came the announcement that there would be changes to the way that life insurance policies written in trust are treated - this article explains what the changes in the Finance Bill could mean.

Life Insurance. Life policies written in trust to be affected by new legislation.

Author: Anna Richardson (life insurance quotations)

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Gordon Brown, Chancellor of the Exchequer, announced in his spring budget that there would be changes made to policy to bring the inheritance tax loophole related to life policies written in trust to an end. The industry quickly realised what this could mean - and within 10 days of the announcement it was estimated that 4.5 million people could be affected by any changes in policy.

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The draft Finance Bill was then published, bringing more details to light which enabled estimates of affected people to fall to 1 million people. ( Cheap Home insurance / great uk articles )In this article, we explain exactly what has been said so far, and what it will mean.

To make it absolutely clear, only the first draft of the Finance bill has so far been released, and it is that that we are commenting on. The legislation has not been passed through Parliament yet and it is possible that the legislation will be turned down at that point. If it does go through, it wont be law until summer 2006, sometime in early July.( Great articles on car insurance - car insurance route ) If the situation does change then we will let you know.

After making the initial budget speech suggesting that ALL life policies written in trust would come under the new law, the government retracted and amended that to all new policies written after the budget date. So if your life insurance policy was written in trust before budget day on 22 nd March, then you dont need to worry, your policy will still be exempt from inheritance tax. (car insurance cover)

If your policy was still in progress and wasnt completed until after March 22 nd , then unfortunately you will be subject to the new tax rules, and you may not be exempt from inheritance tax.

The reason why people usually choose to have their life insurance policy written in trust is because the money can go directly to where its needed, for example to the mortgage provider to pay off the remortgage, or to family members so they can use the tax-free money immediately. The new legislation will not in fact affect these scenarios, because they come to an end with the death of the policyholder. It is only a certain type of trust called an inheritance-in-possession trust that will be affected by the new tax laws. (medical insurance)

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