A leading insurance firm has warned families of the “nasty surprise” inheritance tax (IHT) charges can bring to annuity holders.

LV= says that if a person with a guaranteed annuity dies before the guarantee ends, extra IHT charges could be levied on their family.

Matt Trott, Head of Annuities at the firm, said people could benefit by checking who the annuity provider will make the income payable to.

“Unless these payments are made at the annuity provider’s discretion it is extremely likely that the value of the guarantee payments will fall under the client’s estate for IHT,” he said.

If a 65-year-old male took out an annuity with a 10-year guarantee, and was earning about £7,000 a year, some £8,780 worth of IHT could be charged – if he died after five years and payments were not made at the provider’s discretion, LV= explained.

Research by Which?, the consumer body, earlier this month highlighted a lack of awareness of financial planning among some Britons in their retirement years.

The firm found that 35 per cent of Britons over the age of 65 thought they did need to make a Will.

Senior lawyer Peter McCarthy commented: “If you die without getting your affairs in order, your money, personal belongings and even your home could go to the person you least want to have them and your loved ones could lose out.”

 

For further assistance on wills and elderly client issues contact David Farr at kenneth elliott + rowe solicitors or email david.farr@ker.co.uk