<\/p>\n
The NRB currently stands at \u00a3325,000, while the RNRB is set at \u00a3175,000 in the tax year 2023\/24. It should be noted that the RNRB is applicable only if the deceased\u2019s home, or an amount equivalent to it if downsizing provisions apply, is left to a direct descendant. Any amount exceeding these thresholds is subject to the standard rate of 40% IHT. However, if at least 10% of the estate is left to charity, this rate drops to 36%.<\/p>\n
Transferring of assets to the next generation<\/strong> Gifts that do not count towards the annual exemption<\/strong> Gifts that exceed the \u00a33,000 allowance within any tax year may be subject to IHT. But what else can you give that would be tax-free? Gifts valued at less than \u00a3250 are exempt from this rule. You can bestow as many gifts of up to \u00a3250 to as many individuals as you like. However, this doesn\u2019t apply to anyone who has already received a gift that utilises your entire \u00a33,000 annual exemption. None of these gifts will be subject to IHT.<\/p>\n Wedding gifts and their value<\/strong> Gifts to aid with living expenses<\/strong> Gifts from surplus income<\/strong> PET gifting and the 7-year rule<\/strong> If you settle money into a discretionary trust, such gifts are known as \u2018Chargeable Lifetime Transfers\u2019 or CLTs. Grandparents who want to pass money down to their grandchildren commonly make these, particularly when their children already possess a large estate.<\/p>\n Determining the order in which gifts are liable for IHT<\/strong> Additionally, their order is crucial when determining which gifts are liable for IHT. According to HMRC rules, gifts are assessed starting from the oldest and progressing towards the date of death. Furthermore, any CLTs made within seven years preceding any \u2018failed PETs\u2019 must also be considered.<\/p>\n Navigating the planning and timing landscape of IHT<\/strong> It\u2019s also important to meticulously keep track of any gifts you\u2019ve made. This record will prove invaluable to the executors of your estate should you pass away. It\u2019s worth noting that gifts made from regular income, where expenditure is categorised as normal expenditure, are not classified as gifts by HMRC.<\/p>\n Insuring against a potential IHT bill<\/strong> With a \u2018gift inter vivos\u2019 insurance policy, this life insurance can cover the IHT due on a gift if the donor passes away within seven years, with the sum assured gradually decreasing in line with the tapering of IHT due on the gift. Consideration should also be given to the overall value of your estate. While a \u2018gift inter vivos\u2019 plan may cover the IHT due on a gift over seven years, simple life assurance cover should also be considered as a further IHT mitigation strategy.<\/p>\n Writing policies in an appropriate trust<\/strong> The areas of gifting, protection and trust in financial planning are intricate and multifaceted. They involve understanding numerous elements such as tax implications, legal regulations and individual family dynamics. Given the complexity of these areas, it\u2019s critical to obtain professional advice to help you navigate the intricacies of these financial planning areas, ensuring that your decisions align with your overall financial goals and family needs. Doing so will allow you to develop the most effective strategy tailored specifically for you and your family.<\/p>\n THIS ARTICLE DOES NOT CONSTITUTE TAX OR LEGAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH.<\/p>\n ESTATE PLANNING, TAX, CASHFLOW MODELLING, AND TRUSTS AND WILLS\u00a0ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.<\/p>\n","protected":false},"excerpt":{"rendered":" Distributing assets or cash without contributing to your estate\u2019s overall value for Inheritance Tax purposes In the unfortunate event of one\u2019s passing, there\u2019s a possibility that HM Revenue & Customs (HMRC) may levy an Inheritance Tax (IHT) bill on the deceased\u2019s estate. The estate\u2019s total value determines the sum due after deducting any debts and… Read more »<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[2],"tags":[],"_links":{"self":[{"href":"https:\/\/www.paulyoungifa.co.uk\/news\/wp-json\/wp\/v2\/posts\/4629"}],"collection":[{"href":"https:\/\/www.paulyoungifa.co.uk\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.paulyoungifa.co.uk\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.paulyoungifa.co.uk\/news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.paulyoungifa.co.uk\/news\/wp-json\/wp\/v2\/comments?post=4629"}],"version-history":[{"count":0,"href":"https:\/\/www.paulyoungifa.co.uk\/news\/wp-json\/wp\/v2\/posts\/4629\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.paulyoungifa.co.uk\/news\/wp-json\/wp\/v2\/media?parent=4629"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.paulyoungifa.co.uk\/news\/wp-json\/wp\/v2\/categories?post=4629"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.paulyoungifa.co.uk\/news\/wp-json\/wp\/v2\/tags?post=4629"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\nWith IHT becoming an increasing worry for some people, the goal often becomes the efficient transfer of assets to the next generation, which may include gifting as a strategy to minimise IHT. While you\u2019re still alive in the UK, an annual \u2018gift allowance\u2019 of \u00a33,000 is at your disposal. This is referred to as your \u2018annual exemption\u2019. Essentially, this allows you to distribute assets or cash up to the total value of \u00a33,000 within a tax year without contributing to your estate\u2019s overall value for IHT purposes.<\/p>\n
\nAny portion of the annual exemption not utilised within the tax year can be extended into the following tax year. However, it\u2019s important to note that it can only be used in the subsequent tax year and cannot be carried over further. Certain gifts do not count towards this annual exemption; therefore, no IHT is due on them.<\/p>\n
\nWedding gifts also have their own set of rules. If the gift is to be effective for IHT purposes, it must be given before the wedding, not after. Furthermore, the wedding must indeed take place. Here are the specifics: if the gift is given to a child and is worth \u00a35,000 or less; given to a grandchild or great-grandchild and is worth \u00a32,500 or less; or given to another relative or friend and is worth \u00a31,000 or less.<\/p>\n
\nGifts intended to assist with the living costs of an ex-spouse, an elderly dependent or a child under 18 or in full-time education might also be exempt from IHT.<\/p>\n
\nAdditionally, if your income is sufficient to maintain your usual standard of living, you can make gifts from your surplus income. This could include regularly contributing to your child\u2019s savings account or covering a life insurance premium for your spouse or registered civil partner.<\/p>\n
\nWhen gifts exceeding the annual allowances are made outright to an individual or an Absolute\/Bare Trust, these are termed \u2018Potentially Exempt Transfers\u2019 or PETs. Often, PETs are made to assist a child in buying a property. To ensure that the gift is not included in your estate for IHT purposes, you must survive for seven years after making the gift. If the PET exceeds the NRB (\u00a3325,000), there\u2019s a gradual tapering on the excess in the event of the gift failing; the longer you survive post-gifting, the greater the tapering.<\/p>\n
\nComplications may arise if an individual has made both PETs and CLTs before their passing. This is due to the fact that the order of these gifts can result in a calculation of 14 years\u2019 worth of gifts when determining the IHT position.<\/p>\n
\nPlanning and timing are key when navigating the complex landscape of IHT. If a person makes a PET but unfortunately passes away within six years and 11 months, the PET is considered unsuccessful. From this \u2018failed PET\u2019 date, HMRC will look back an additional seven years and incorporate any CLTs into their calculations. Therefore, if you\u2019re considering transferring money into a trust or gifting it outright, it\u2019s highly recommended you discuss this with us first.<\/p>\n
\nYou\u2019ve made some gifts and hope to survive for seven years. While this is an option, you can also insure against the IHT payable on your estate should you pass away within seven years of making your gift, and the liability for the tax would then fall on the recipient of the gift. This can be achieved by taking out a \u2018gift inter vivos\u2019 insurance policy or a \u2018whole of life\u2019 policy.<\/p>\n
\nTo cover the potential IHT that your estate may be liable for upon your death, you could secure a \u2018whole of life\u2019 policy\u2019 that provides lifelong coverage. Whichever option is chosen, it\u2019s recommended that these policies are written in an appropriate trust, ensuring that any benefits paid out if you pass away and a claim is made on the policy are not included in the value of your estate for IHT purposes.<\/p>\n