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Gifting
You may assume that it’s relatively easy to mitigate IHT by gifting assets to loved ones, but this is not always the case.
Features
- No Costs
- Save 40% IHT after 7y
- Very straight forward
Limitations
- Lose control and access to assets, entirely
- Must survive for 7y
If you can afford to make sizeable gifts, it can be the most straight forward and least expensive solution…
In making gifts you are giving away your capital, and with it you are giving away control and access. You need to be sure you will not need this money in your lifetime; this is the biggest limitation of this strategy.
Gifts can take a number of forms, but this site is not an educational site. In our opinion gifting is used to either limit IHT growth or to mitigate IHT.
Mitigate IHT: Large gifts
In making large gifts you can significantly reduce your IHT liability, but the time to be effective is 7y, which isn’t ideal if you have left your IHT planning late. There is tapering of the IHT between 3 and 7 years after the gifts, but this is only effective for gifts above your available nil rate band, so care and advice should be sought.
Limiting IHT: Regular Gifts and Gifts from Normal Income
Using the gifting exemptions available to us, we can make such gifts without IHT implication. This will usually only stand to limit estate growth via excess income and gains, so isn’t usually an effective method to mitigate the tax.
Traffic light comparison
| Access | Speed | Simple | Control | Cost | |
|---|---|---|---|---|---|
| Gifting | |||||
| Whole of Life | |||||
| Loan Trust | |||||
| Discounted Gift Trust | |||||
| Flexible Reversionary Trust | |||||
| Business Property Relief |
How each of the solutions fare in relation to these issues is indicated above using a traffic light system; green being the most favourable.
Please note: this graphic is subjective to change, not every expert will agree on the distribution of colours. There is much more to know before you act and that you should always seek financial advice first.
Gifts (in practice)
In most cases there is too much uncertainty about required access in the future for unknown expenses and longevity.
We will normally find that larger gifts are made to assist children and grandchildren in buying property, but beyond that there are usually better ways to move money out of the taxable estate over 7y (as you are able to maintain access to income and potential maturities via other methods).
IHT Planning is best dealt with holistically, taking into account all of your finances and goals
We have many years of experience in advising clients across the country who wish to protect their estate, and we provide a tailored service for each individual. Our company is well qualified to answer questions and enable you to organise your assets.
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