Inheritance Tax: Retirees warned ‘it can make far more sense to give gifts’

Inheritance: Expert gives advice on 'good planning'

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Carefully planned lifetime gifting can be a useful tool to reduce Inheritance Tax (IHT) after retirement, she explained. Speaking on Legal and General’s Rewirement podcast, she continued: “It’s really important to think carefully about gifting.

“For a lot of people, it can make far more sense from a tax perspective to give money while you’re still alive, so make sure that you understand the options.”

Inheritance Tax is a tax on someone’s estate who has passed away, which includes their property, money or possessions.

Taxpayers are able to give away upwards of £3,000 every tax year to their family and loved ones without them being added to the value of their estate.

She continued: “Lots and lots of our customers prefer watching their loved one’s benefit from what we call a living inheritance.

Generally, people become more financially self-sufficient as time goes.

Often by the time people receive a traditional-style inheritance, they need it less than when they would have when they were younger.

The reality is that by giving a financial gift earlier you could help loved ones.

They are then able to buy a home, fund their education, pay for their wedding or help ensure their financial security.

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Ms McLeish added: “Financial advice can be really helpful for those that can access and afford it, but do you have a look at those in early inheritances.”

Under the current tax rules, estates valued at a minimum of £325,000– have to pay up to 40 percent in Inheritance Tax.

This includes all the assets a person leaves behind after they die including property and savings after debts and funeral costs have been deducted

However, if the person gifts some of their estate early, the overall asset value in the estate is reduced.

This can either take it under the £325,000 threshold or, at least, reduce the amount of Inheritance Tax that needs to be paid.

This can either take it under the £325,000 threshold.

Or, at least, reduce the amount of Inheritance Tax that needs to be paid.

Inheritance Tax is not paid on the gifted money if the person making the gift lives for over seven years.

If they die before then the person receiving the gifted money could be liable to pay Inheritance Tax.

No Inheritance Tax is paid on gifts between spouses and civil partners, provided they live in the UK.

Furthermore, taxpayers can also give away wedding or civil ceremony gifts of up to £1,000 as part of the exemption.

Everyday gifts, such as birthday or Christmas presents, are also eligible to be part of the exemption.

However taxpayers must be able to maintain a certain standard of living after making the gift.

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