Gifts...all year round!
There are ways to reduce inheritance tax liability on death. Below, I highlight some of the gifts that can be used without your needing to survive seven years following a gift, together with an investment option that we will cover at our seminars in March 2017.
Each individual has an allowance of £3,000 in any tax year to make a gift without being subject to inheritance tax assessment and, if a gift has not been made in the previous tax year, i.e. in 2015/2016, then a further £3,000 can be made. You can give any number of gifts of less than £250, although please note that each recipient can only receive one such gift. Another possible option is to make gifts out of surplus income which, for those who have excess income not required for day-to-day expenditure, can be given away and will be free of inheritance tax. These payments must be made regularly from income, not capital, and must leave the individual with sufficient income to maintain their usual standard of living.
Discounted gift trusts
Some of you may already be aware of discounted gift trusts. This type of arrangement is an investment made into an investment bond, which can be held onshore or offshore, and is coupled with a trust - generally a discretionary trust - from which you must receive an income - usually up to 5% per annum of the gift. Providing you survive the gift for seven years the value of the bond, together with any growth, will be outside your estate for inheritance tax purposes. In addition, you will benefit from an immediate discount for inheritance tax purposes on part of the original investment amount into the trust, but dependent upon medical underwriting.
With this type of arrangement it is important to seek the advice of an independent financial adviser and, possibly, a solicitor, which, at Birkett Long, we can arrange under one roof.