The common misunderstanding
People often say life insurance is tax-free. That is a simplification. Proceeds are not normally subject to Income Tax or Capital Gains Tax, but a payment made into an estate may affect that estate's Inheritance Tax position.
For a modest estate this may make no practical difference. For a larger one, it can matter considerably.
Liquidity is the real issue
Where an estate is largely property, land or a trading business, the difficulty is rarely value — it is having cash available when an obligation falls due, without selling something the family intended to keep.
This is why cover written in an appropriate trust is a common subject of enquiry for substantial estates.
Where advice is essential
Cromwell Associates does not provide tax advice and makes no claim that any arrangement removes or reduces a tax liability. What we can do is help you understand the shape of the question and connect you with an appropriately qualified specialist.
Estimates should be revisited periodically: asset values change, and so do the rules.
Sources and further reading