What are Joint-Life Second–Death Policies ?

Posted by admin On December 24th 2020

When using a whole-of-life policy to provide funds likely to be required to pay inheritance tax on the death of a married couple/civil partners, it is common to use the type of policy that is guaranteed to pay out when the second person dies. This is commonly known as a ‘last survivor or joint-life second death’ policy.

A Joint-Life Second Death (JLSD) Whole-of-Life Plan is established in order to pay out upon the death of the second person attached to the policy. Assuming all premiums have continued to be paid throughout the term, the insurers will pay out upon the death of the original surviving partner. This is commonly used to meet potential liabilities for Inheritance Tax.

 

The reason for this is that, in most family situations, the estate of the first of the spouses to die is passed over to the surviving partner free of IHT, and the IHT only becomes due when the surviving partner dies and the estate is passed on to the remaining family or beneficiaries.

 

JLSD is typically less expensive than a common Joint-Life First Death insurance scheme, as there is less of a risk to the insurance company. Alternatively, taking out two single policies means that a lump sum can be paid out on both deaths when they occur.