Planning and distributing your estate early on can help you to reduce inheritance tax and also help your dependents benefit from the inheritance when they need it rather than when you are gone.
We are as a nation living longer and so it may be that by the time our children inherit our estate they are nearing retirement themselves. An example that made me smile was considering that the Prince of Wales is 69 this year and still waiting to receive the crown and take up the position as King. Rather than looking at retirement, he is looking to start a new job. Either way our life plans have adapted around the fact that we are living longer.
With rising living costs and house prices we may well prefer to provide inheritance earlier on so that a first home could be purchased, an extension built or a grandchild sent to University. We may feel we want to contribute early to whatever is an important phase in our loved ones’ lives and see them enjoy that, rather than wait until we are not here to enjoy it with them.
Making regular gifts can be an effective way of distributing your wealth early.
- Your spouse or civil partner can receive gifts at any time and for anything you own, free of tax.
- Gifts to other people can be up to £3000 a year or £6000 if you are a couple to other people, also free of tax, per year. If you miss a year, the allowance can be combined with the following year but for that year only.
- If your children get married you can give them a gift of £5000, £2,500 to grandchildren and up to £1000 to anyone else.
- When you get married you can gift £2,500 to your bridegroom, bride or civil partner.
- Birthday or Christmas gifts can be allocated of up to £250 multiple times to a number of recipients.
You need to survive for 7 years for the gift to not be classed as part of your estate and therefore attract less or no tax, again reinforcing the need for early planning.
Remember it is best practice to keep records of any gifts. This can be just a simple note with when and what the gift was. Keep them with your documents or will so that should the need arise they can be found.
If you would like to review your inheritance planning just give us a call. Everyone’s circumstances are different and so we recommend you get independent financial advice for any kind of estate planning including gifts and trusts. Call us on 0333 456 0333 or email firstname.lastname@example.org to arrange a consultation.