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Lifetime gifts – sharing your wealth with your family

10th November 2016

With Christmas rapidly approaching, our thoughts turn naturally to the subject of giving — perhaps you are considering gifting money to close family or to charity. In fact, one of the most efficient ways to mitigate your Inheritance Tax (IHT) liability is simply to give away accrued wealth whilst you are still alive.

If you are in the enviable position of having substantial cash assets, you could consider making large cash gifts to children or grandchildren. Admittedly, balancing essential financial planning for retirement with offering the younger generation a helping hand can be difficult and it is important to ensure you retain sufficient funds for a comfortable retirement.

Yet it is a good idea to make gifts whilst you are still fit and have a realistic life expectancy of more than seven years. This is because lifetime gifts, including those in excess of the annual £3,000 IHT exemption threshold, are not liable to IHT if the donor survives the gift by seven years.

Your assets can be passed on either as absolute gifts or, to avoid concerns about the future protection of the monies, through a trust that offers the advantage of tighter control over the funds.

Sharing your wealth with your children might be one way of helping a younger generation of your family onto the property ladder. Giving in your lifetime also affords you the pleasure of seeing children or grandchildren enjoying the gift and benefiting from the help you have given them.

If you are not in a position to make large gifts to close family or beloved friends, other options are worth consideration. For example, in addition to taking advantage of your annual IHT allowance (cash transfers of up to £3,000 in any tax year are exempt from IHT), gifts of up to £250 may be given to an unlimited number of persons without incurring a tax liability provided no single person receives more than £250 in any tax year while, if you are not cash-rich yet have a good income stream, regular gifts from income in excess of normal expenditure are free from the seven-year survival IHT exemption rule. Gifts to any registered charity are also exempt from IHT.

If you are interested in sharing your wealth during your lifetime, George Ide’s private client team can provide expert legal advice and will be happy to discuss your options with you in confidence.

Ursula Watt. Partner & Head of Private Client department.

General, George Ide, News, Private Client, Wills and Probate
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