Key takeaways
Make gifts that reflect your wishes
Ensure your wealth benefits your family and future generations.
Lifetime gifts can reduce Inheritance Tax
Support your loved ones now while potentially reducing Inheritance Tax.
Trusts help protect family wealth
Preserve and protect assets for your family and future generations.
Estate planning enables you to make gifts both during your lifetime and after your death, and can ensure your gifts achieve what you planned, for example:
supporting family members while you are alive
helping future generations after your death
providing for minor children (by use of a trust)
making charitable contributions.
Gifting can also reduce the Inheritance Tax Liability (IHT) of your overall estate, and there are tax advantages to charitable gifting.
Lifetime gifts can be given when needed the most, such as providing financial support to family (eg education costs, purchasing a home).
Should you survive for seven years after making the gift there may be no IHT liability on that gift.
While gifts to spouses (or civil partner) and qualifying charities are generally exempt from IHT, there are also a number of other gift allowances to consider:
annual gift allowance of £3,000 per tax year, which could be carried forward for one year
gifts of up to £250 per person each tax year, as long as they have not benefited from the annual gift allowance
wedding (or civil partnership) gifts of up to £5,000 to a child, up to 2,500 to a grandchild or great-grandchild and up to £1,000 to any other person
regular gifts out of surplus income could also be exempt from IHT if your standard of living is not compromised and gifts meet HMRC's requirements.
Testamentary gifts take effect after death and can help ensure assets are distributed according to your wishes.
They can include money, investments, property, business assets and non-financial items such as personal possessions, and allow you to control the distribution of the assets after your death.
If structured efficiently they can potentially provide tax planning opportunities.
You can tailor testamentary gifts to your family's circumstances so they could be used, for example, to provide financial support and preserve family assets.
When considering minor children, you can structure gifts via trusts to ensure assets are protected for their benefit, in a tax efficient way, while ensuring your intentions are followed.
Taxation, trust, and estate planning rules can be complex, but we can provide professional advice to ensure gifts are structured efficiently and in accordance with current UK law.
Find out more about our Succession planning, wills, trusts and estates expertise or contact us today to discuss how we can support you.
This article was co-authored by Senior Paralegal, Sue Dunning.
