A UK tax on capital wealth or assets transferred to other persons (except a spouse) within the seven years preceding the benefactor’s death. There are certain exemptions from IHT, e.g. gifts out of income; gifts to support certain relatives in need. Life insurance is used to both minimise and pay the tax. Liquid funds from a policy obviates the forced disposal of assets to fund the tax liability. The first £255,000 is in a ‘nil rate’ tax band (2003).

any part of a life insurer’s assets which is not required for smoothing purposes or to pay terminal bonuses; sometimes referred to as ‘orphan estate’.