From: john boyle 
Newsgroups: uk.finance
Subject: Re: PET protection
Date: Tue, 11 May 2004 09:01:43 +0100

In message <2gbdg8Fsc7rU4@uni-berlin.de>, stuart noble 
 writes
>
>john boyle wrote in message ...
>>In message <2ga176FenaaU1@uni-berlin.de>, stuart noble
>> writes
>>>If I make a gift and want to insure against dying within 7 years, I gather
>>>there is a life assurance where the cover decreases in line with the
>>>potential inheritance tax bill. Is it better to insure myself with the
>>>policy written in trust or should the recipient insure me?
>>>Any comments appreciated.
>>How much is the PET? And how much are any previous pets within the last
>>7 years?
>There will be two at £100K each. No previous PETS.

Then you need level term assurance for £200k x 7 years, with no 
decrease. Write the policy in trust for the recipient, this is easier 
than him insuring you.

The reason it doesnt decrease is because the rule says that any PETS are 
added into the estate in order to calculate IHT. Any IHT that would be 
payable on the PETs will decrease after year 3. But it also says that 
when applying the nil rate band (currently £263k) this is applied to 
PETs first. So in this case, as the PETs are less than the nil rate band 
there is not tax due on them and therefore there is no IHT to taper. 
Therefore, the whole £200k will be added back into your estate in full 
for 7 years. The Nil Rate Band is still available of course and is 
applied to the 'whole' estate.
-- 
John Boyle