CII Certificate in Insurance - Financial Protection (R05) Practice Exam

A gift inter vivos policy specifically serves to protect a lifetime gift from inheritance tax. When an individual makes a gift during their lifetime, it may be subject to taxation upon death if it exceeds a certain value or if the donor retains certain benefits from the gift. The purpose of the gift inter vivos policy is to ensure that the value of the gift remains intact for the recipient by providing a death benefit that can cover any potential inheritance tax liability that may arise. This allows the donor to make gifts without the financial burden of tax implications impacting the recipient's inheritance.

The nature of this policy is such that it focuses on the transmission of wealth during life, contrasting with policies that primarily deal with wealth transfer upon death, making it essential for proper estate planning.