Many people will have wealth sufficient to leave an Inheritance Tax liability even if their Wills are effective. They may wish to make use of the allowances and exemptions detailed elsewhere and also consider lifetime planning strategies. These include: -
Outright Gifts To Individuals (Potentially Exempt Transfer)
You may make a gift to another person and provided that you survive for 7 years after making the gift there will usually be no Inheritance Tax to pay. This type of gift is referred to as a Potentially Exempt Transfer (PET) and tax reductions relief apply progressively after three years. You can make unlimited gifts both in size and number and therefore, if you give all of your estate away and live seven years your estate can escape Inheritance Tax entirely. It is important to remember that for a gift to be effective for Inheritance Tax purposes you must not enjoy any further benefit from the gift such as receiving income from an investment or continuing to live rent free in a property. However, most of us are not able to survive without any assets or the income from them; should you still retain an interest in an asset you have gifted it will still be treated as part of your estate. A common instance would be where a person gives their house to their children and carries on living there. The house will still be liable for Inheritance Tax. However, if the person were to pay a full commercial rent the gift would usually count as a PET.
Lifetime Gifts To Trusts
Unfortunately most people will need the assurance that they may have some access to their capital in the future especially if their circumstances change, perhaps due to ill health. Many people would feel confident in giving capital to the family if they could retain the right to receive an income but a PET will not be effective if the person making the gift draws income or capital in the future. There may also be reservations about giving children large amounts of capital at a young age when it may be wasted or lost in a divorce.
We can arrange your investments within trusts so that capital can be gifted for the eventual benefit of your chosen family members. The gift will usually escape Inheritance Tax if you survive seven years. The advantages of this approach include:
• No Inheritance Tax liability if you live seven years or more
• You can still receive an agreed level of payments from the investment thus achieving Inheritance Tax reduction whilst preserving your income position.
• You retain control over how the money is invested and may change those who benefit.
• Any growth on the investments falls immediately outside of the estate.
• A ‘discounted’ version will normally reduce the tax bill immediately.
Substantial Inheritance reductions can be made and in many instances, once the seven year period has elapsed, the process can be repeated thus allowing assets equivalent to the nil rate allowance to be removed every seven years. There are a wide variety of schemes available that can invest in collective investments designed to meet your investment objectives and priorities. We can provide the relevant trust vehicle and our sister FCA regulated business can advise on suitable investments.
Please contact us for more information.
Outright Gifts To Individuals (Potentially Exempt Transfer)
You may make a gift to another person and provided that you survive for 7 years after making the gift there will usually be no Inheritance Tax to pay. This type of gift is referred to as a Potentially Exempt Transfer (PET) and tax reductions relief apply progressively after three years. You can make unlimited gifts both in size and number and therefore, if you give all of your estate away and live seven years your estate can escape Inheritance Tax entirely. It is important to remember that for a gift to be effective for Inheritance Tax purposes you must not enjoy any further benefit from the gift such as receiving income from an investment or continuing to live rent free in a property. However, most of us are not able to survive without any assets or the income from them; should you still retain an interest in an asset you have gifted it will still be treated as part of your estate. A common instance would be where a person gives their house to their children and carries on living there. The house will still be liable for Inheritance Tax. However, if the person were to pay a full commercial rent the gift would usually count as a PET.
Lifetime Gifts To Trusts
Unfortunately most people will need the assurance that they may have some access to their capital in the future especially if their circumstances change, perhaps due to ill health. Many people would feel confident in giving capital to the family if they could retain the right to receive an income but a PET will not be effective if the person making the gift draws income or capital in the future. There may also be reservations about giving children large amounts of capital at a young age when it may be wasted or lost in a divorce.
We can arrange your investments within trusts so that capital can be gifted for the eventual benefit of your chosen family members. The gift will usually escape Inheritance Tax if you survive seven years. The advantages of this approach include:
• No Inheritance Tax liability if you live seven years or more
• You can still receive an agreed level of payments from the investment thus achieving Inheritance Tax reduction whilst preserving your income position.
• You retain control over how the money is invested and may change those who benefit.
• Any growth on the investments falls immediately outside of the estate.
• A ‘discounted’ version will normally reduce the tax bill immediately.
Substantial Inheritance reductions can be made and in many instances, once the seven year period has elapsed, the process can be repeated thus allowing assets equivalent to the nil rate allowance to be removed every seven years. There are a wide variety of schemes available that can invest in collective investments designed to meet your investment objectives and priorities. We can provide the relevant trust vehicle and our sister FCA regulated business can advise on suitable investments.
Please contact us for more information.