Royal London has launched a joint life second death life cover option to help clients with their estate planning and IHT mitigation. The option, available on its Personal Menu Plan, is designed to offer a cost-effective alternative to whole of life cover for those with potential IHT liabilities.
Joint life second death provides a payout on the second person covered if they die or are diagnosed with a terminal illness, during the term of the cover up to age 90. It’s an option already provided within Royal London’s whole of life plan and is now available on its term life cover.
Cost-effective solution for estate planning
Joint life second death gives advisers more options for IHT planning, allowing them to provide their clients more choice. It’s an option that can be considered as a more cost-effective alternative to whole of life insurance, appealing to the growing number of clients who need to manage their IHT liabilities. This includes affluent and high-net-worth individuals over 40 years of age who generally possess substantial assets but have limited liquidity.
Protection on gifted assets
The cover also features a valuable gifting option, enabling assets given to the family during the individual’s lifetime to be protected. Individuals can make lifetime gifts, carving out a portion of the sum assured with a separate ‘gift inter vivos’ policy to insure against the cost of them dying within seven years of the gift, after which the asset passes tax-free. Importantly, there is no need for medical re-underwriting when using the gifting option.
Growing number of estates caught by IHT
Rising house prices and frozen tax thresholds, alongside the decision to include pensions and pension death-in-service benefits within estates for IHT from April 2027, will mean more estates will fall into the taxable bracket for IHT, unless action is taken. The Office for Budget Responsibility1 estimated that the proportion of deaths subject to IHT is likely to increase to nearly one in 10 by the end of the decade. These factors are likely to push up the demand for IHT planning.
Jennifer Gilchrist, protection expert at Royal London, said:
“The subject of inheritance tax has found itself in the spotlight recently. It will continue to be a focus for advisers and their clients as the application of inheritance tax to pensions and business and agricultural property, as announced in the Budget, challenges the financial planning mindset and leads to a radical re-think for estate planning.
“Over time, more and more people could face a liability when passing on assets to their next of kin. It also means that life insurance policies will become more popular for those facing large liabilities. Incorporating life insurance into estate planning allows clients to ensure assets are managed according to their wishes.
“While some of the changes won’t impact until April 2026 and beyond, our new proposition is coming at the right time, helping to assist advisers reviewing existing clients’ circumstances and filling any gaps in their existing provisions. Additionally, it may provide opportunities to attract new clients with the expansion of the target market interested in this type of cover.”
Ben Backhouse, founder of high-value life insurance broker, Risk Assured, said:
“The dust may have settled on Rachel Reeves’ first Budget, but many clients are feeling decidedly unsettled about changes to inheritance tax and what the new rules mean for their estate planning.
“When it comes to planning for an inheritance tax liability, clients want reassurance and certainty that assets can be passed to their loved ones, according to their wishes. Royal London’s new joint life second death term assurance is a welcome addition for high-net-worth clients looking for solutions in a market with a limited number of providers.”
