Looking beyond Whole of Life: exploring alternatives for IHT liabilities
Rebecca Lowe, Retail Product Lead for Protection at Aviva, explores how rising inheritance tax exposure is reshaping estate planning conversations and explains when alternatives to Whole of Life cover, such as Joint Life Second Event term assurance, may offer a practical solution for high-net-worth clients.
Inheritance tax (IHT) planning has never stood still. But for many advisers, the pace of change is accelerating.
Frozen thresholds, rising asset values and proposed changes to pensions from April 2027 mean more families could face an inheritance tax bill than ever before. What was once seen as a challenge for only the very wealthy is becoming a more common conversation across the high-net-worth (HNW) market.
That creates a new challenge. It's one thing to identify a potential liability. It's another to help clients put a realistic plan in place to fund it.
Whole of Life insurance remains one of the most established ways to provide certainty around a future IHT liability. But certainty comes at a cost. For some clients, particularly those looking to balance protection with affordability, premiums can become a sticking point.
That's why more advisers are broadening the conversation. Alongside traditional Whole of Life solutions, Joint Life Second Event (JLSE) term assurance is emerging as a valuable tool for clients who want meaningful protection without committing to the higher cost of permanent cover.
Why IHT planning is moving up the adviser agenda
Inheritance tax receipts have continued to rise as more estates are drawn into the tax net. Property wealth, investments and pension assets have helped increase estate values, while frozen allowances mean many families are finding themselves closer to a liability than they expected.
The proposed pension changes due from April 2027 are expected to add another dimension to planning conversations. For some clients, pension wealth that was previously viewed as an efficient way to pass on assets may need to be considered differently as part of their broader estate planning strategy.
That doesn't mean clients should panic. But it does mean advisers have an opportunity to help them review their position and consider how any future liability could be funded.
Because while an inheritance tax bill may not arrive for many years, it often creates an immediate need for liquidity when it does arise.
Without a plan in place, beneficiaries may face difficult decisions, including selling assets or accessing cash at short notice to settle the liability.
Why Whole of Life continues to play an important role
For clients focused on long-term certainty, Whole of Life cover remains one of the most effective protection solutions available.
Structured correctly, often on a joint life second death basis, it is designed to pay out whenever the second death occurs. That means funds are available precisely when many inheritance tax liabilities become due.
For advisers, that certainty can be valuable. It provides confidence that a known liability can be met and helps create clearer estate planning outcomes.
But Whole of Life isn't always the perfect fit.
Premiums can be significant, particularly for older clients or those with larger estates. Some clients may understand the need for protection but struggle with the cost of maintaining cover over the long term.
Understanding the client psychology behind IHT planning
Inheritance tax can be a difficult subject for clients to engage with. It asks them to think about death, family wealth and a future liability that may feel distant, uncertain or even avoidable.
Even where the numbers are clear, clients may delay taking action. Some may assume that rising asset values will be offset by future planning decisions. Others may feel uncomfortable paying regular premiums for a tax bill their beneficiaries, rather than they themselves, will ultimately face.
Affordability also plays a powerful role. A technically suitable solution can still fail if the client sees the premium as too high, too inflexible or too disconnected from their day-to-day priorities.
That is why the adviser conversation is not only about calculating the liability. It is also about helping clients understand the risk, feel confident about the trade-offs and choose a level of protection they are prepared to maintain.
In that context, a more flexible option can be important. If the alternative is no cover, or a delayed decision, a term-based solution may help clients take a practical first step while their wider estate planning strategy develops.
The growing case for Joint Life Second Event term cover
This is where Joint Life Second Event (JLSE) term cover may have an important role to play.
Like a traditional joint life second death Whole of Life policy, JLSE term cover is designed to pay out following the second death. The difference is that the cover runs for a defined period rather than for life.
That makes it particularly relevant where the adviser is not trying to insure a permanent liability, but a transition period — for example, while gifting strategies mature, pension planning evolves, or estate values are expected to reduce over time.
That distinction can make a significant difference to cost.
For many clients, JLSE term cover can provide a substantial amount of protection for a much lower premium than an equivalent Whole of Life solution. This may allow advisers to secure meaningful cover levels while helping clients stay within their budget.
Importantly, this isn't about positioning term assurance as a replacement for Whole of Life cover. The two solutions serve different purposes.
Instead, JLSE term can offer a practical option where IHT exposure is expected to reduce over time, or where clients are actively taking steps to reduce the size of their estate.
For clients who might otherwise delay making a decision because of affordability concerns, that flexibility can be valuable.
When could JLSE term cover be suitable?
Every estate planning strategy is different. But there are several scenarios where JLSE term cover may be particularly relevant.
1. Clients who are gifting wealth
Many HNW clients are actively reducing the value of their estate through lifetime gifting.
Over time, successful gifting strategies can reduce the eventual inheritance tax liability. During that transition period, however, there may still be a potential exposure.
JLSE term cover can help protect against that risk while wider estate planning arrangements take effect.
2. Clients expecting their estate to change
Not every inheritance tax liability is permanent.
Some clients expect asset values to reduce over time through wealth transfer, business succession planning or property disposal strategies.
Where exposure is expected to fall, permanent cover may not be necessary. A term-based solution can offer protection during the period when it's most needed.
Building flexibility into estate planning
The most effective inheritance tax strategies rarely rely on a single solution.
Gifting, trusts, investment planning and protection can all have a role to play. The adviser's job is to bring those moving parts together in a way that reflects the client's objectives, circumstances and appetite for risk.
As inheritance tax planning becomes relevant to a wider range of clients, flexibility is likely to become even more important.
Final thoughts
Affordability may become one of the biggest barriers to IHT protection as more clients are drawn into scope from April 2027. If permanent cover is unaffordable, the risk is not simply that clients choose a different product. It is that they choose to do nothing.
For advisers, the opportunity is to move the conversation from whether a client has an inheritance tax liability to how that liability could realistically be funded. That means identifying clients whose exposure is growing, testing whether Whole of Life remains affordable and appropriate, and considering whether a term-based solution could protect the period where risk is highest.
It also means documenting the rationale clearly: why the level of cover is appropriate, why the term matches the client’s estate planning strategy, and what could happen if the policy ends before a claim is made.
In a changing IHT landscape, the advisers who add most value will be those who help clients act before the liability becomes urgent, balancing certainty, affordability and flexibility in a way clients can understand and sustain.
The information in this article is based on our understanding of current and proposed tax rules. Tax treatment depends on the individual circumstances of your clients and may change in future. Joint Life Second Event and Whole of Life term assurance used for IHT planning is for married couples/civil partners.
AUTHOR
Rebecca Lowe
Retail Product Lead, Protection
Aviva