Recomend And Justify

Question 1

R & J - suitable life policy to cover current and future IHT liability (14)

Answer 1

• joint life 2nd death WOL
• held in trust for executors of the will
• no IHT in first death
• instead it is on second death
• in trust to executors
• to ensure it remains outside of the estate on second death
• is then available to executors to pay the IHT liability
• sum assured to meet the current IHT liability
• they can keep control of existing assets
• indexation to keep pace with inflation
• guaranteed assurability may be available
• so cover can be increased in future with no further underwriting
• which will be a benefit if their health deteriorates just the future
• premiums can be paid out of normal expenditure so immediately exempt from IHT
• guaranteed premiums to provide a known future cost

Question 2

Drawbacks of WOL (8)

Answer 2

• cover may not match IHT liability
• estate may increase faster than indexation
• estate value may decrease
• it doesn’t reduce the IHT
• due to nicks smoker status
• and family health
• cover may be unaffordable
• reduce disposable income in retirement
• if reviewable premiums, cover may be unaffordable