As inheritance tax planning becomes increasingly complex, protection is playing a more prominent role in helping advisers support clients’ long-term estate planning goals. In this insight, Rebecca Lowe, Retail Product Lead, Protection at Aviva, explores how changing legislation, evolving client needs, and greater product flexibility are making protection an increasingly valuable tool for managing inheritance tax liabilities and preserving wealth for future generations.
Inheritance tax may be one of the most emotive areas of family financial planning and one of those most subject to change. Rising estate values, frozen thresholds and changes to tax policy mean that customers may be looking to advisers for help in planning for the future.
Pensions have long been regarded as one of the most effective ways to pass wealth to the next generation largely due to their favourable tax treatment. With the forthcoming proposed legislative changes altering this position, advisers will need to explore new strategies to safeguard and transfer wealth to beneficiaries.
How is protection reshaping inheritance tax and estate planning discussions?
The fundamentals of estate planning still matter just as much as they always have, but increasingly advisers are turning to protection products, such as whole of life plans, to give clients greater certainty. The change to include pensions in the taxable estate creates the opportunity to think more broadly about the solutions on offer.
Advisers are recognising that protection can do more than provide a lump sum on death. It can create liquidity when it’s needed, provide a solution when tax rules change, and help families transfer wealth. We believe that protection should be part of estate and intergenerational planning conversations.
Whole of life insurance and term assurance in estate planning
One of the clearest examples of this shift is the renewed role of whole of life policies. Its relevance has widened to a larger client base as clients look for a greater breadth of solutions.
Whole of life cover can be aligned directly to an expected IHT bill, often written on a joint life second death basis, ensuring that funds are available when liabilities arise. Its appeal is increasing for clients who want to eliminate uncertainty from their arrangements, with advisers finding this form of protection an essential part of their toolkit.
But protection is not purely about lifelong cover. Many clients face temporary or transitional IHT exposures for a range of reasons. This can be due to gifting, the sale of a business, or an increase in asset values.
In those cases, your traditional term assurance model provides advisers with a flexible alternative. The policy term can be aligned to match the period of risk, protecting the estate without requiring clients to commit to the cost of permanent cover.
Protection plays a particularly valuable role when it comes to gifts in fact. Gifting remains one of the most effective IHT mitigation tools, but the seven-year rule can introduce uncertainty. Protection allows advisers to safeguard against that risk using structured, decreasing, or staggered term cover designed to mirror the taper relief timeline (taper relief reduces IHT on gifts made 3–7 years before death.)
Using protection to manage inheritance tax on gifts
Providers are increasingly supporting these strategies through streamlined digital application and digital trust processes, making implementation far easier than it once was.
Trust-based planning remains another important dimension. Writing protection policies into a trust can ensure proceeds fall outside the taxable estate and reach beneficiaries quickly.
This is vital as beneficiaries may be required to meet IHT charges. Digital trust solutions have transformed what was once a time- consuming administrative step, allowing advisers to embed trusts into protection recommendations more seamlessly, making the process much more efficient.
Flexibility is also becoming a differentiator in modern protection products. Many clients do not want to revisit medical underwriting each time circumstances change. Options that allow cover to be increased following events such as gifting or changes to tax legislation, without further medical evidence, give advisers a practical way to future‑proof their recommendations.
The future of protection in inheritance tax planning
When dealing with high‑value estates or more complex scenarios, such as international assets, business ownership, or specialist underwriting needs, advisers increasingly lean on provider business development managers (BDMs). This means that technical, trust, tax and underwriting expertise allows advisers to navigate complicated cases with greater confidence and efficiency.
The direction of travel is clear: protection is becoming central to wealth and estate planning. As insurers evolve their products, digital processes and support for advisers, there are more opportunities than ever to integrate protection meaningfully into their IHT planning conversations, helping clients protect more of their wealth and pass it on in line with their wishes.
