If you have Life Insurance, this should certainly be listed as one of your assets. We recommend providing as much helpful detail as possible to assist your executors such as the insurance provider’s name and the policy number.
Your life insurance pay out will be counted as part of your estate for inheritance tax purposes. Whether the executors of your estate handle the life insurance payment and pass the money on to your beneficiaries or a lump sum/regular payment is paid to your dependents, the amount will be included in the overall value of the estate for inheritance tax purposes (though it will not usually attract income or capital gains tax).
Where life insurance is paid directly to a spouse or a charity, inheritance tax would not normally be charged.
Where your life insurance is written into a trust – that will go directly to the beneficiaries and sit outside of your estate.
This article is part of our Islamic Wills FAQ series.