What is Gift Inter Vivos?

Gift Inter Vivos cover can protect your loved ones from any potential inheritance tax liability on money or assets you have gifted them. This type of policy is only suitable for clients who have gifted sums that exceed the nil rate Inheritance tax band.

Gift Inter Vivos Insurance is a form of Term (life) insurance that covers the potential Inheritance Tax (IHT) liability. That is created when someone gives a sum of money or other assets away while alive and they die within 7 years of giving the gift. The policy will last 7 years – as long as the tax is liable for the gift.

Gift Inter Vivos policies need to be written into Trust otherwise the gift will form part of the estate (therefore increasing the IHT liability). Trusts are not regulated by the Financial Conduct Authority.

The levels and bases of taxation and reliefs from taxation can change at any time and is dependent on individual circumstances.

Speak with a qualified adviser about your situation today at 0800 644 4468 or request a call back.

Here are some frequently asked questions from our clients:

  • Gift inter vivos (GIV) works by providing a life insurance policy for a length of seven years. To understand how it reduces Inheritance tax liability ( IHT), it is necessary to explain IHT itself.

    In its simplest terms, when someone dies IHT is paid on any part of your estate that exceeds the ‘nil-rate band’. The ‘nil band’ is a threshold that currently stands at £325,000 ( or £650,000 for couples). The nil rate band amount increases where primary residences are left to family members, qualifying estates can continue to pass on £500,000. Up to these limits, no IHT is payable. Above these limits, the current rate of IHT 40% will be payable in inheritance tax.

    To minimise the amount of IHT payable, often older generations can gift money or assets to relatives before they die. This act removes the amount from the estate and so removes it from the amount exceeding the nil band. It is important to note that an individuals gift needs to  exceed the nil rate band for a GIV policy to be relevant.

    If the person giving the gift were to die within seven years, a reduced form of IHT will still be payable. Hence the need for a GIV policy. The payout from a GIV policy will cover the amount of IHT payable protecting the receiver from a hefty tax bill.

    Gift inter vivos insurance policies are 7 years in length and are tailored to track the liability for Inheritance Tax. After 7 years the gift will usually be exempt from IHT. The insurance decreases in line with the IHT liability it is covering. The sum assured is only payable upon death during the term. A GIV policy must be put in a Trust otherwise it will form part of the estate (increasing the inheritance tax liability).

    Trusts are not regulated by the Financial Conduct Authority.

    The cash lump sum that is payable on death reduces over the term of the plan as follows:

    Policy Year      % of Initial Cover

    1                                      100

    2                                     100

    3                                     100

    4                                       80

    5                                       60

    6                                       40

    7                                       20

    The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of tax relief depends on individual circumstances.

  • A Gift inter vivos policy is based on the life of the older person who is giving the ‘gift’. This could be money or assets such as property from the IHT taxable part of their estate. This policy will pay out when they die.

    The Gift inter vivos benefit is for the person or people who have received the gift. It is they who will use the payout to pay the IHT liability. Either party can pay for the premiums. 

  • You need a Gift inter vivos policy if you have been gifted a substantial sum that forms part of a person’s taxable estate. 

    You may need a GIV policy if you do not have the money to cover the inheritance tax that may be charged at 40% of the total gift amount. The amount of GIV insurance should be calculated by a tax adviser.

    The table below illustrates the reduction in tax from the date of your being given the gift and the givers death.

    “Gifts given in the 3 years before your death are taxed at 40%. Gifts given 3 to 7 years before your death are taxed on a sliding scale known as ‘taper relief’” HMRC 2022 .https://www.gov.uk/inheritance-tax/gifts   


    Years between your gift and death Tax rate
    Less than 3 years 40%
    3 to 4 years 32%
    4 to 5 years 24%
    5 to 6 years 16%
    6 to 7 years 8%
    7 years or more 0%

    The levels and bases of taxation and reliefs from taxation can change at any time and is dependent on individual circumstances

  • The benefits of Gift inter vivos are needed if you receive a substantial gift of money or an asset from an older relative. The policy will pay out an amount to cover the Inheritance tax liability on that gift. This only applies if they were to pass away within the 7 years since they gifted it to you. 

    If you did not have this policy covering the IHT liability, then you would have to pay the IHT yourself on the gift. 

    A GIV policy also provides peace of mind to the person making the gift. Knowing that their loved ones will not have to pay IHT if they were to pass away within the 7 years. After all, the ultimate purpose of the gift would be to reduce IHT upon death.

    The levels and bases of taxation and reliefs from taxation can change at any time and is dependent on individual circumstances.

  • There are many well known insurance providers that offer Gift inter vivos insurance. All insurers however charge different rates. They also view underwriting differently. There are many pre-existing medical conditions that impact the price of life insurance premiums. 

    Some of the most common conditions include:

    • Cancer
    • Arthritis
    • Diabetes
    • Obesity
    • Asthma
    • Cholesterol
    • Mental health conditions
    • Heart disease / high blood pressure

    At Future Proof, we have access to specialist insurance companies that don’t deal directly with the public. These companies offer more specialised policies, designed to provide cover where other major providers can’t.

    Our research process involves us contacting many insurers to find out the best possible outcome for our clients. Which avoids any nasty shocks later on during the underwriting process.

    Would the insurer add a ‘loading’ to their standard premium? (this is an additional sum charged on top of their standard monthly premium to reflect their additional risk). Or, exclude a condition?

    Might they decline the application? We want to avoid wasting time by making applications that may be declined.

    We have up to date knowledge of the ever-changing landscape of underwriting for all providers in the UK. Future Proof is committed to thorough research so that you don’t have to. What’s more, our advice comes at no obligation and with no hidden costs.  You don’t pay us directly but we get paid by the insurer if you decide to start a policy with them.

  • The cost of Gift inter vivos cover is dependent on the amount to be insured and on the age and health of the donor. We will be happy to provide a no-obligation quote and advice for your situation. Premiums generally start at £7 per month.

How do I get a quote on Gift inter vivos Insurance?

Whilst you are welcome to get a quote online, we would recommend you speak to one of our advisers. Any quote that your adviser provides you with will take into account your circumstances and medical history, as well as your budget!

An online quote is just that – a quote – it isn’t a definite offer of cover. What really matters is the premium you are offered, after your application has been assessed.

Please feel free to read all about us and meet the team at Future Proof here