If you’re keen to pass wealth to your children, grandchildren or great grandchildren to support your family goals and direction in life, where do you start? What would be the future implications of any actions you took today, if any? While many of our clients ask for advice on this subject, first things first...
Spending time looking at the options available can pay dividends later in life, so over the next few months, that’s what we’ll be doing.
Horses for courses.
Life would be pretty dull if we were all the same and maximising wealth would be too. Different solutions suit different circumstances and gifting is just one. You could for example gift £100,000 to your child, but if they, together with a spouse, already own assets over £650,000*, you’ll inadvertently increase their Inheritance Tax liability (and if you didn’t know, Inheritance Tax weighs down at a whopping 40%). This could leave loved ones out of pocket further down the line.
If there are grandchildren in the picture, gifting directly to them could be a viable alternative and beneficial to both you and the child.
Gifting of assets is also an option, it needn’t just be money. For example, could you pass your property to your children to cut your tax bill?
If one objective in passing down wealth would be to mitigate your own Inheritance Tax liability, be mindful that most gifts would need to have been made no less than seven years before your own death. Thinking and planning with the bigger picture in mind is therefore important.
With the future in mind…
Here’s a summary of the options we’ll cover in this series:
If at this point you feel that any of the above options might be worth exploring (or relevant to a family member or friend’s circumstances), please speak to your adviser or get in touch. While we’ll be covering these options in more detail from a general view, by understanding your particular goals and circumstances we can be specific with our advice and after all, time is precious.
Tom Stephenson BSc (Hons) DipFA
*£650,000 is the 2018/19 tax year allowance for married couples and civil partners (£325,000 per individual) before any assets in the deceased’s estate become subject to Inheritance Tax. If one spouse dies, the allowance would be transferrable to the remaining spouse.
Warning - Tax treatment depends on individual circumstances and may be subject to change in the future.
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