Regular giving throughout your lifetime is automatically exempt from Inheritance Tax. However, it is only exempt if the gift is made out of funds which are a part of the individual’s surplus income – i.e. the money which is gifted must be beyond the individual’s living costs. To prove that gifts are made out of surplus income, executors will have to have a record of their loved ones expenditures and their income. This can be a little confusing to obtain if the individual has not kept a record of their expenditures. For this reason if you are considering engaging in a lifetime giving scheme you are urged to keep a record of your finances to save your executor difficulties. It is highly advisable to talk through your options with a financial advisor or a lawyer.
A pattern of giving must be established to prove that the donor has been making regular gifts – or there must be enough financial information available to show that the donor had the intention of making regular gifts if they have only made one or two. This pattern of giving may be as little as once a year, or may be more than this. Gifts made less than once a year though will not be counted at regular lifetime giving. The amount which is given each time does not need to be exactly the same, which allows for a certain amount of flexibility. Often individuals will gift money regularly to their grandchildren, children, to charity, or into certain schemes.
Lifetime giving means you do not have to worry about the rules which apply to normal ‘gifting’ of money and property. When individuals gift property or money, the items will still be considered when calculating the value of their estate at the time of their death if they pass away less than seven years from the date of the gift. So for gift of this kind exempt from inheritance tax you will have to live for seven years after the date of the gift.
If you need more information about inheritance tax, gifting, or lifetime giving you should consult a solicitor. This will ensure that you comply with all the necessary requirements to ensure that your inheritance tax planning is well structured and that your estate is easy to deal with once you are gone. Give a specialist solicitor such as Roskell Davies a call today. The sooner you organise your finances, the better you can organise your finances. All initial enquiries are offered free of charge, just call 0800 142 2901 or fill in an online enquiry.