A Relevant Life Policy Trust and its place in financial planning for a business

by Tracey Heath

Published on 8th June 2022

Our guest blogger, Debra Hale of Prospero Finance, looks at a Relevant Life Policy Trust, which she says is one of the most overlooked tax benefits in financial planning

A Relevant Life Policy Trust is a type of life insurance that is owned and paid for by a business. It is similar in concept to employer’s Death in Service provision but is costed and underwritten based on the life of a single individual as long as they are receiving some PAYE earnings.

The policy is placed in a specially created trust at the outset, to hold any pay out should it occur.

Many small business owners could benefit from the tax efficiencies this cover can provide over paying for a life insurance policy personally.

If you are director of a limited company, you could be paying the premiums for your personal life cover policies through your business account as a deductible expense. Combine that with the premiums not being subject to Income Tax and the fact that there is no National Insurance to be paid either, then this really is a tax efficient way of setting up your life cover.

You may also need to think about mitigating your Inheritance Tax liability, and using this type of trust can actually reduce your IHT bill, as the proceeds payable on death are considered outside of your estate.

Another benefit of setting up a policy in this way is that the premiums paid and the benefit payable are not taken into account in your pension Annual or Lifetime allowances.

If you would like more information about a Relevant Life Policy, do get in touch with Debra at Prospero Finance.

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