Being Generous can be Rewarding…Consider Succession Planning

Neves Solicitors - succession planning

Wills are often the primary consideration in the context of succession planning and rightfully so; you cannot overstate the importance of a well-thought out, competently drafted Will. However, if you are one of the “lucky” ones whose estate may attract a liability to inheritance tax (IHT) on death, as a tax planning tool, a Will has its limitations. It is, therefore, necessary for those looking to mitigate IHT to take action sooner rather than later. You should also consider the use of lifetime gifting as part of the wider estate planning process.

How can Lifetime Gifting Help?

By decreasing the size of your estate during your lifetime, it is possible to reduce IHT payable on death. There are various types of gifts that can be made which are classed as “exempt gifts”. Once made, the value is outside of your estate for IHT purposes.

There is no limit as to how much a person may gift away during their lifetime to other individuals. Even if the gift does not classify as an exempt gift, provided the gift is survived by 7 years, it will have no effect on your estate’s IHT liability upon death.

Are There any Risks?

The rules surrounding lifetime gifting and IHT are complex and require consideration and planning. If a gift is not survived by 7 years, the value of that gift can fall back into your estate on death for IHT purposes. It is also important to consider your own financial needs and whether you can afford to make the gift without negatively impacting on your own standard of living.

The loss of control of an asset can create issues which are when the use of an appropriate trust structure might prove useful. When you contemplate a gift take particular care. If the donor is intending to retain a benefit this could fall foul of HMRC’s “gift with reservation of benefit” rules. It is also necessary to consider the potential capital gains tax implications of any intended gift.

If you feel that you would benefit from IHT planning and succession planning advice, our Private Client team are always on hand to help and would welcome your enquiry.

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