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Gifts and inheritance tax

18 August 2016

How gifts can reduce your liability for inheritance tax

Inheritance tax (IHT) at 40% is due on the portion of a person's estate that exceeds £325,000. This can be reduced to 36% if 10% (or more) of the estate is given to charity.

Married couples and civil partners can transfer any unused allowance to their spouse, meaning the nil-rate band can potentially double to £650,000.

Although leaving an inheritance has traditionally been a key part of estate planning, attitudes are changing.

Research by Prudential has found that people's expectations around being able to leave an inheritance have changed significantly in the last 5 years.

28% of people planning to retire this year think they will leave an inheritance, compared to 52% in 2001.

Instead, people are choosing to financially support their loved ones while they are alive: 35% already give money to family members, the average gift is £250 a month and 13% give more than £500 a month.

In most cases (81%) children and their partners are the beneficiaries, though 15% of individuals support their parents.

Seeing your assets being put to use while you are alive can be very rewarding. In addition, gifts can help reduce IHT as most are exempt from IHT if you live for 7 years after making the transfer.

A careful gift-giving strategy can help minimise your liability to IHT and ensure that you leave as much as possible of your estate to your loved ones.

This article also includes information on:

  • Lifetime gifts
  • Other exempt gifts
  • Giving away your home
  • Keeping records
  • Creating a gifting strategy

To view this article in full, please click here

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