Gift Inter Vivos Life Insurance Calculator
Calculate the IHT risk on a potentially exempt transfer and model the gift inter vivos (GIV) decreasing insurance needed to cover the tapering IHT liability over 7 years.
Gift Inter Vivos Insurance Calculator
A Potentially Exempt Transfer (PET) becomes fully exempt from IHT if the donor survives 7 years. Gift inter vivos insurance covers the tapering IHT liability during the 7-year period — matching the decreasing IHT exposure year by year.
Remaining NRB after other chargeable transfers in prior 7 years
Frequently Asked Questions
What is a gift inter vivos policy?
A gift inter vivos (GIV) policy is a decreasing term life insurance policy designed to match the tapering IHT liability on a Potentially Exempt Transfer (PET) over the 7-year period. If the donor dies within 7 years, the policy payout covers the IHT liability that would fall on the recipient.
How does IHT taper relief work on PETs?
If the donor dies within 7 years of making a gift, IHT may be due. The IHT liability tapers: 0-3 years: 40% IHT (no taper), 3-4 years: 32% (80% of 40%), 4-5 years: 24% (60%), 5-6 years: 16% (40%), 6-7 years: 8% (20%), after 7 years: 0%. Note: taper relief reduces the tax, not the chargeable amount.
Who takes out the gift inter vivos policy?
The recipient of the gift (donee) typically takes out the GIV policy on the donor's life. This is a 'life of another' policy. Premiums are paid by the donee from the gifted funds or their own money, and the payout covers the potential IHT liability if the donor dies.
How is the sum assured structured?
The GIV policy is written as a decreasing term policy matching the IHT taper. The sum assured decreases each year to match the declining IHT liability. For a £500,000 gift above the NRB: Year 1: £200,000 cover (40% IHT), Year 4: £120,000 (30%), Year 7: £0 (exempt).
Are GIV insurance proceeds taxable?
The GIV policy should be written in trust for the beneficiaries — typically the donor's estate or the donee. Proceeds paid from a policy written in trust are generally free from IHT and income tax. If not written in trust, the proceeds may form part of the donor's estate.
Can I take out a GIV policy on my own life?
Yes. The donor can also take out a GIV policy on their own life and write it in trust for the donee. If the donor dies within 7 years, the policy pays out to the trust beneficiaries (the donee), covering their IHT liability without adding to the donor's estate.
What if the donor already has other health conditions?
Medical underwriting applies to GIV policies. If the donor is in poor health, premiums will be higher or cover may be declined. In cases of severe health issues, insurers may only offer a restricted sum assured. For donors in poor health, IHT planning using other strategies may be more appropriate.
Is a GIV policy the only way to cover PET risk?
No. Alternatives include: accepting the 7-year risk without insurance, using the donor's remaining estate to fund IHT (if large enough), making smaller gifts over multiple years to use annual exemptions, or structuring giving through exempt routes (normal expenditure from income, etc.).