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Lifetime Gifts Solicitors specialising in lifetime gifts of assets or money in Milton Keynes

Lifetime gifts are being made more and more often, with families wanting to plan for the future in an effective way now, not just on death. Assets or money given away by someone during their life can have long term tax saving effects if done correctly. This could be, for example, to help a child onto the property ladder or pay for healthcare for a relative.

If someone gives gifts totalling more than £3000 in any one tax year, this may have Inheritance Tax implications on their death. In addition, other important points to consider include whether or not the gift creates an unfairness in the Will, in which case there could be a risk of litigation.

Giving away assets has the potential to reduce the Inheritance Tax liability of an estate. However, it is essential to fully understand all the implications before gifting money or assets and as ‘when’ and ‘how’ the gifts are made can make a big difference. It is a complex area of law and it is advisable to seek legal advice to ensure that you are dealing with your estate in the best way possible.

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Two types of lifetime gift

Lifetime gifts fall into two categories:

Potentially exempt transfers

An outright gift to an individual is in most cases classed as a potentially exempt transfer or PET. If the person making the gift survives for seven years after the gift is given, then it will be exempt from Inheritance Tax.

Gifts with reservation of benefit

Where a gift is made, but the person gifting it (the ‘donor’) retains a benefit in it, then the seven-year rule does not apply. By way of example, if a property is given to children but the donor continues to live there, when they die it will form part of their estate and the value of the property will be included in Inheritance Tax calculations.

A very minor benefit is permitted, for example, occasional social visits to the property, but it must have been transferred and owned by the beneficiary to your exclusion for it to qualify as a potentially exempt transfer.

Gifts with reservation of benefit can also give rise to other tax implications, meaning that there is a risk that tax could be paid twice. This can generally be avoided by careful planning and structuring.

Lifetime gifts and Inheritance Tax

Making gifts in the most tax efficient way is important, if the aim is to reduce tax liabilities. Very often, people leave it too late to make really tax efficient gifts, but by acting sooner and taking the right advice, significant sums can be saved.

If a PET is made, but the donor dies within 7 years, then the value of the gift when it was made is added to the value of the estate at death and the person who received the gift could get a nasty tax surprise.

Where a reservation of benefit is made, then the value of the gift at the date of death is added into the estate- in effect making the gift pointless as a tax saving measure.

Exempted gifts

There is an annual gift allowance, known as the annual exemption, which means that you can usually give a certain amount away without any Inheritance Tax implications. The annual exemption amount is currently £3,000.

You can also make gifts on the occasion of a marriage, with the amount allowed tax-free depending on the relationship between you and the recipient of the gift.

At Christmas and for birthdays you can gift around £250 per year, but not to the same people that received your £3,000. Often, such gifts are structured across the generations over the years, with the whole family able to benefit.

Gifts out of excess income are permitted, but the rules on how this has to be done are detailed and mistakes easily made, so it is always better to check first, to avoid an Inheritance Tax liability arising.

Sara Taylor

For expert advice contact our lifetime gift solicitors

It is always important to consider the Inheritance Tax implications when making lifetime gifts to ensure that difficulties do not arise in the future.

At Heald Solicitors, our solicitors are experts in tax and estate issues and can advise you on the best way to structure your affairs. While our office is in Milton Keynes, we are experienced in working with clients throughout England and Wales, often remotely, meaning that you can expect the same expert legal advice and excellent client care wherever you are located.

If you wish to talk to us about lifetime gifts or you have any questions about how trusts work, please get in touch with our legal expert Sara Taylor .

01908 662277
[email protected]
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Why choose Heald Solicitors to be your Wills, Trusts and Probate lawyers?

At Heald Solicitors in Milton Keynes, our team have extensive experience in dealing with Wills, trusts and probate, including complex or high-value estates, business succession and dispute resolution.

We understand that dealing with Wills and probate can be hard, and you will find us sympathetic and approachable. We provide excellent client care and will make sure we are always available to speak to you to discuss the progress of your matter and answer any questions you may have.

We work proactively to make sure that your case is dealt with as quickly and efficiently as possible and we will always keep our costs to a minimum to ensure you receive good value for money.

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Our Legal Expert Sara Taylor

Get to know us wih a call back, at a time that suits you. Let us offer some guidance and direction to start your journey with Heald Solicitors today.