Gift inter vivos insurance is life cover taken out when someone makes a large lifetime gift, to put money in the hands of the person who received it if the giver dies within seven years and an inheritance tax bill falls due on the gift. The cover is built to fall as the possible tax falls. Providers use the Latin phrase to mean a gift between the living; its legal meaning is on gift inter vivos: what it means.

Planning a gift and wondering how cover could sit around it? Put your details into the form here and an FCA-authorised broker will ring you, at no cost.

What is gift inter vivos insurance?

It is term cover aimed at one risk: a gift that has not yet been out of the giver's hands for seven years. Scottish Widows' adviser page describes a gift inter vivos plan as one that "allows you to set up individual policies which collectively aim to provide a lump sum to cover the potential IHT liability that could arise for the person who has received the gift, if the donor of a gift dies within seven years of making the gift."

Three things set it apart from the cover most people buy. It insures the tax on a gift, not a mortgage or an income. It lasts at most seven years, because the tax risk ends then. And the amount paid is meant to fall over those years, in step with the tax rules below. The insurers quoted here write for advisers.

What are the inheritance tax rules on gifts made within seven years of death?

The rules here are GOV.UK's as they stood in October 2026, and tax rules can change. The starting point: "No tax is due on any gifts you give if you live for 7 years after giving them - unless the gift is part of a trust. This is known as the 7 year rule." Most lifetime gifts are "potentially exempt transfers", because a gift is exempt if the person survives seven years after giving it.

If the giver dies inside seven years, tax on the gifts is only due where they add up to more than the nil-rate band of £325,000, and gifts "use up the £325,000 tax free allowance first." The government's thresholds paper (26 November 2025) says the nil-rate band and the residence nil-rate band will be fixed "at their current levels for the tax years up to and including 2030 to 2031." Some gifts are exempt whatever the timing, such as those between spouses or civil partners who meet GOV.UK's conditions.

The rate then depends on the gap between gift and death: gifts in the 3 years before death "are taxed at 40%", and gifts 3 to 7 years before death "are taxed on a sliding scale known as ‘taper relief’":

Years between gift and deathRate of tax (GOV.UK)
Less than 340%
3 to 432%
4 to 524%
5 to 616%
6 to 78%
7 or more0%

Three points matter for the insurance. The rate falls on the part of the gifts above the £325,000 threshold, not on the whole gift: in the worked example in GOV.UK's guidance on gifts, a gift that "was £150,000 over the Inheritance Tax threshold", made 5 to 6 years before death, is taxed at 16% on that excess. Taper relief "only applies if the total value of gifts made in the 7 years before you die is over the £325,000 tax-free threshold", and not to gifts made less than 3 years before death. And the person who got the gift is usually the one asked to pay: once more than £325,000 has been given in those seven years, "anyone who gets a gift from you in those 7 years will have to pay Inheritance Tax on their gift."

Gifts made through a trust, and gifts where the giver keeps a benefit, follow other rules, which the same guides set out. How a life policy itself is treated is in is a life insurance payout taxable?

How is a gift inter vivos policy built to match the falling tax?

The cover mirrors the table. Scottish Widows' adviser page says the plan "is designed so that the overall sum assured reduces by 20% per year from the end of year 3." Its adviser guide (35816 07/26) explains how: "Five term assurance policies are required and set up under trust." Zurich's adviser guide (LIFKAC407 8/26) describes the same build, with the five policies running "for three, four, five, six and seven years respectively, with each covering a fifth of the potential bill." As each shorter policy ends, the total cover falls, and so, it says, does the total premium.

The same guide says "Specific Gift Inter Vivos policies are available that provide a decreasing level of cover over a seven-year term", but that "the market for these policies is small", so rates "aren’t particularly competitive", and it offers the series of level policies as a way to replicate the effect. Royal London's adviser guidance (21 April 2026) names both routes: "a single reducing (decreasing) term matched to the IHT profile, or layered level term plans". How a decreasing policy works in general is in what decreasing term life insurance is; the level kind is in what a level term policy is.

That guidance also says taper relief "reduces the tax, not the value of the gift", and only once the gift is more than three years old. So the cover is not a fixed share of the gift. The Scottish Widows page puts the normal starting cover at the possible tax, "40% of the amount of the PET in excess of the available nil rate band", and not 40% of the whole gift unless all of it is liable. That tax depends on the nil-rate band and on any earlier gifts, which is why the advisers' examples are worked case by case.

The material from all three insurers adds a second piece. While a failed gift has used up the nil-rate band, the rest of the estate has "an increased liability", which a separate seven-year level term policy written in trust can cover. Royal London's example puts that cover at "£130,000 equivalent to the 40% tax liability on the nil-rate band", and says to consider it "unless the rest of their estate would be exempt".

If you want to hear how the insurers a broker deals with set up cover around one gift, ask on the call that follows the quote form here.

Why is a gift inter vivos policy usually written in trust?

Scottish Widows' page says the policies "would be written under trust for the recipients of the gift so they can pay the IHT due in respect of the gift." The reasoning follows the rules above: the recipient is normally the person liable. Royal London's FAQ says the recipient is liable "which is why protection is often written in trust for that recipient", and that trusts "can help ensure proceeds go quickly to the intended recipient".

The same guidance names an alternative: the recipient takes out the cover on the giver's life. Being liable for the tax, they would "stand to lose financially" if the giver dies within seven years, which it says gives them insurable interest up to the possible tax. Which route fits is for the people involved and a professional.

For how trusts work, see what a life insurance trust is; for the forms and steps, how to put a life insurance policy in trust; and for tax on payouts to a trust, is life insurance taxable in a trust?

Who might gift inter vivos cover suit?

It is aimed at someone who has made, or plans, a gift large enough that tax could fall on the recipient. Royal London's guidance frames it around gifts above the nil-rate band, made by clients giving "significant lifetime gifts — often more than once." By the rules above, a gift within the nil-rate band, or an exempt one, carries no tax to insure.

The people the advisers' material describes are those who want a recipient to keep the full gift whatever happens. Scottish Widows' page says premiums "will usually be covered by either the £3,000 annual exemption or the normal expenditure out of income exemption." GOV.UK says to ask "a solicitor or a tax adviser" what can be given tax free.

Gift cover is separate from covering a tax bill on the estate itself. A couple weighing whole of life cover for that should read whole of life insurance and inheritance tax; the wider subject is in the trusts and tax guides.

What does it cost, and who offers it?

No market price can be given honestly. Premiums usually depend on the giver's age, health and smoking, the amount of cover and the length of the policy, and insurers set them case by case. A broker's quote on your own details is the way to an actual figure. The adviser documents quoted here give no maximum age for taking the cover out, so ask the insurer or a broker about that.

The insurers whose material is quoted here are Scottish Widows (its Scottish Widows Protect plan), Zurich (the series of level policies, plus a Gift Inter Vivos option on its Joint Life Second Event term policy) and Royal London (guidance on both routes). Naming them is not a ranking, and this page does not try to list every provider; a broker can say which of the insurers they deal with offer it. Policy documents from two insurers are covered in LV= and Royal London gift inter vivos key features.

For a specific gift, the quote form here starts the process of an FCA-authorised broker getting back to you, free.

Frequently asked questions

What happens if the giver survives seven years?

Under the GOV.UK rule no tax is due on the gift. Scottish Widows' adviser guide says the gift becomes fully exempt and "the GIV plan can be cancelled".

Does the policy pay the giver's own estate?

Not when it is written for the recipient. Scottish Widows' page says the policies are written in trust for the recipients, so they can pay the tax on the gift. A separate seven-year policy for the estate is a different arrangement, as above.

Can you cover more than one gift?

Royal London's guidance works through an example with two gifts, in which "each recipient is liable to the tax on their individual gift" and cover is set up for each. Zurich says a series of level policies is "really flexible, making it easy to cover any further gifts that are made." How earlier gifts use the nil-rate band is for an adviser to work out.

Is the cover part of whole of life insurance?

No, it ends within seven years. Whole of life cover has no end date; see what whole of life insurance is.

Sources