Death and taxes are said to be life's two great certainties but many people overlook how they can insure against the former of these and meet liabilities under the latter. One option is to use life assurance with a sufficient level of cover on death to repay the anticipated inheritance tax (IHT) bill and to protect what you have worked hard to build throughout your life.

A solution to this increasing problem could be for a married couple or civil partnership to purchase a whole-of-life policy that becomes payable on the second death. Currently, husbands and wives or civil partners are permitted to inherit assets without an IHT liability. It is following the second death that any tax could subsequently become payable.

The whole-of-life policy should be written in trust and should preferably be a discretionary trust, following the rule changes announced regarding trusts. Any life insurance payout made should then be outside the estate for the purposes of calculating IHT, otherwise the exercise is pointless. The current rules state that the trust has to be valued every ten years and could result in a tax charge of up to 6 per cent of its value.

Normally the trust is valued on the basis of the premiums paid. However, if a person died just before an anniversary review, the death could trigger a payout and the tax would be charged on the full value of the insurance.