Lifetime gifts can offer people the opportunity to benefit from the tax reliefs that are available for the use of this kind of estate planning. In her latest article, Laura Richardson explains your options . . .

The Inheritance Tax rate in the UK is currently a staggering 40%. This rate is applied to the portion of your estate that is worth over £325,000. It is no wonder then that you may be looking to minimise the amount of Inheritance Tax that would be due on your Estate to ensure that your loved ones will receive the maximum benefit from your estate after you die.

There are many Estate Planning tools and strategies that can protect your estate from Inheritance Tax liability. However, this area of the law is highly complex, and making mistakes can lead to costly fines or even criminal prosecution and therefore it is highly advisable to discuss your personal situation with an experienced specialist in Estate Planning in order to ensure that you receive the correct advice for your Estate. However, the good news is that there are also some very simple ways to minimise your Estate’s Inheritance Tax liability including taking advantage of the Inheritance Tax relief that is applied to lifetime gifts. In general, gifts that you make during your lifetime will be exempt from Inheritance Tax liability providing that you live for 7 years after the gift was made.

Nevertheless, there are several exemptions to this 7-year rule:

  • Lifetime gifts to your spouse or civil partner are exempt from Inheritance Tax providing that your partner resides permanently in the UK.
  • Regular gifts such as Christmas or birthday presents that you would normally make within the course of your lifetime using your standard income are also exempt.
  • A further annual exemption applies to any additional gifts to the above provided the combined total of these additional gifts is less than the maximum of £3,000 in any tax year.
  • Wedding gifts can also be exempt from Inheritance Tax providing that they total less than £1,000 per person. (The allowance is higher if the wedding gift is to your child or grandchild!)
  • If you contribute to the living costs of another person, for example, an elderly relative, these payments are also exempt from Inheritance Tax liability.
  • Lifetime gifts made to charities are also exempt from Inheritance Tax liability.

Although minimising the Inheritance Tax liability on your Estate is one advantage of utilising the various exemptions, on a more personal level, gifting during your lifetime also allows you to see the benefit that your gifts give to your loved ones. If you would like to discuss your Estate and the possibility of making lifetime gifts to your loved ones call Andrew Douglas Wills & Legal Services today. We remain fully operational during the Covid-19 pandemic via our popular remote consultations and as such we welcome enquiries from across the UK. Call today to arrange your free initial remote consultation.

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