Estate planning has long been viewed as the preserve of high-net-worth individuals — something handled through trusts, wills, and asset restructuring late in life. But in 2025, the conversation is shifting.

With rising corporation tax rates, tighter inheritance tax rules, and growing awareness of how company-funded benefits work, many directors are now using Relevant Life Insurance as an active estate planning instrument — not just a form of life protection.

At Willow Private Finance, we help directors and entrepreneurs use their limited companies intelligently to fund long-term protection, mitigate tax exposure, and ensure assets pass to the next generation efficiently.

Relevant Life Insurance plays a surprisingly pivotal role in that strategy. It doesn’t just protect the family — it helps form the foundation of a tax-optimised estate plan, ensuring wealth is transferred cleanly, quickly, and tax-free.

Why Estate Planning Matters More in 2025

The UK’s tax and wealth environment has changed dramatically in recent years. The nil-rate inheritance tax (IHT) band has remained frozen at £325,000, despite inflation, and the residence nil-rate band has capped at £175,000. For many directors and professionals with property and business interests, this means IHT exposure now begins far sooner than expected.

Add to that increasing corporation tax (up to 25%) and dividend tax rates as high as 39.35% for additional-rate payers, and directors are seeking smarter, legitimate ways to transfer value out of their companies without incurring unnecessary liabilities.

Relevant Life Insurance offers one of the few HMRC-approved methods to achieve exactly that. It creates a tax-free asset, held in trust, paid directly to beneficiaries on death — outside the estate and outside the company.

In other words, it’s both personal protection and estate planning, wrapped in a compliant, efficient structure.

The Role of Relevant Life in Estate Planning

Estate planning aims to ensure that wealth — including property, investments, and company value — passes efficiently to heirs. Life insurance is often used to provide liquidity for inheritance tax, settle debts, or equalise inheritance between beneficiaries.

Relevant Life policies enhance this process by providing directors with a company-funded, tax-efficient route to build that liquidity.

Here’s how it works in practice:

• The company pays the premium (typically tax-deductible).
• The policy is written in a discretionary trust for chosen beneficiaries.
• The payout bypasses probate and the deceased’s estate entirely.
• The funds reach beneficiaries quickly and tax-free.

Because the policy sits outside the estate, it doesn’t increase IHT exposure. Instead, it provides families with instant, tax-free liquidity — often the difference between preserving and selling assets.

It’s particularly useful for clients whose wealth is tied up in property or shareholdings, where liquid cash isn’t immediately available to cover taxes or expenses after death.

Why the Trust Structure Is Critical

A trust isn’t just a formality — it’s the mechanism that makes Relevant Life effective for estate planning.

Without the trust, the payout could fall into the deceased’s estate and become subject to inheritance tax. By writing it into a discretionary trust from the outset, directors ensure:

• The proceeds bypass probate and delays.
• Trustees can access funds immediately.
• The payout remains outside the estate for IHT purposes.
• The company’s ownership of the policy does not confuse entitlement.

At Willow Private Finance, we ensure every policy is correctly written under trust — typically using insurer-provided templates — and that trustees understand their responsibilities. We also work with clients’ accountants or solicitors to align the trust with wills, shareholder agreements, and family structures.

How It Complements Other Estate Planning Tools

Relevant Life Insurance isn’t a replacement for traditional estate planning — it’s a powerful complement.

It works alongside:

• Pensions – Both are company-funded and sit outside the estate, offering long-term, tax-efficient wealth transfer.
• Shareholder Protection – Ensures business continuity and structured buyout options between family members or partners.
• Wills and Family Trusts – Define distribution, guardianship, and long-term legacy management.
• Key Person Insurance – Protects the business if a family member critical to operations dies unexpectedly.

Together, these components form an interlinked structure that safeguards both personal wealth and business continuity.

Willow often helps family directors review all of these in tandem, ensuring no overlap or inefficiency.

The Tax Efficiency Explained

From a tax standpoint, Relevant Life policies deliver multiple layers of benefit — all within HMRC rules.

1. Corporation Tax Relief
   Premiums are typically allowable expenses, reducing taxable profit.
2. No Personal Tax
   The insured director incurs no income tax or National Insurance — the premium isn’t classed as a benefit-in-kind.
3. Inheritance Tax Exemption
   Proceeds are paid via trust, sitting outside the estate and avoiding 40% inheritance tax.
4. Immediate Access for Beneficiaries
   Because the payout bypasses probate, trustees can release funds rapidly — ideal for covering short-term costs or maintaining property and business operations.

The overall impact is significant: company funds are converted into a tax-free legacy for family members, without the double taxation normally involved in extracting funds through salary, dividends, or inheritance.

Common Scenarios Where It Adds Value

1. Property-Rich, Cash-Poor Families

Many directors hold most of their wealth in property or trading businesses. A Relevant Life payout provides immediate liquidity for beneficiaries, avoiding forced sales or refinancing to pay tax bills.

2. Family Businesses with Multiple Shareholders

Relevant Life ensures each director’s family is financially secure if one passes away, while shareholder protection ensures the business remains stable.

3. High-Value Estates Near IHT Thresholds

Even families below £2m can now face IHT, particularly with property inflation. Relevant Life offers an elegant, compliant way to pass additional wealth tax-free.

4. Directors with Cross-Border Assets

For UK-based directors with assets abroad, the trust structure ensures proceeds remain ringfenced and unaffected by foreign probate or tax laws.

Pitfalls to Avoid

While the advantages are compelling, estate planning through Relevant Life requires precision. Common mistakes include:

• Not executing the trust before policy inception.
• Naming the company as beneficiary (invalid for IHT protection).
• Failing to review trustee appointments as family circumstances change.
• Allowing cover levels to stagnate while estate values grow.

At Willow Private Finance, we audit every client’s setup regularly, ensuring the trust remains compliant and aligned with their estate size, business interests, and family goals.

The 2025 Outlook

Estate planning in 2025 is about foresight and flexibility. With frozen tax thresholds and rising asset values, more estates than ever are becoming liable for inheritance tax.

Relevant Life is not a loophole — it’s an approved, practical, and enduring way for directors to manage these realities. As more accountants and advisers recognise its benefits, it’s becoming a cornerstone of holistic wealth and succession planning.

For company directors, especially those with family-owned businesses or high-value estates, it’s one of the simplest and most effective ways to ensure your company contributes directly to your family’s financial security — tax-efficiently and compliantly.

How Willow Private Finance Can Help

At Willow Private Finance, we specialise in connecting protection planning with wealth and succession strategies. Our advisers work alongside accountants and solicitors to ensure your Relevant Life policy integrates seamlessly into your broader estate plan.

From policy setup and trust execution to reviewing inheritance exposure and company accounts, we take a holistic approach that ensures efficiency, compliance, and long-term clarity.

If your estate planning hasn’t yet considered the role of company-funded life cover, 2025 is the time to start. We’ll help you understand how much protection you need, how it interacts with your other assets, and how to make it work intelligently for your legacy.

Frequently Asked Questions

Q1: How does Relevant Life support estate planning?
A: It provides a tax-free payout via trust, bypassing the estate and probate, ensuring beneficiaries receive funds quickly and without inheritance tax.

Q2: Can I use it to cover expected inheritance tax bills?
A: Yes, many clients use Relevant Life proceeds to create liquidity for IHT, allowing other family assets to be preserved.

Q3: Does the trust need to be updated regularly?
A: It’s good practice to review it every few years or after major life events, to ensure trustees and beneficiaries remain correct.

Q4: Can I include non-family members as beneficiaries?
A: Yes, trusts allow full flexibility — you can name dependants, partners, or other chosen individuals.



Q5: Is Relevant Life suitable for large estates only?
A: Not at all. It’s beneficial for any company director or family business owner looking to protect wealth efficiently.

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