When undertaking inheritance tax planning, most people are aware of the opportunity to gift money. If the donor survives 7 years from the date of the gift, the gift is not included in the inheritance tax calculation for the estate.
As we age, the '7 year rule' becomes more of a concern and gifting may not be effective for inheritance tax planning. One little used relief is 'Gifts made as part of normal expenditure out of income'. This allows you to make a regular gift out of your excess income, which is not added back into your estate.
To take advantage of this relief you must:
– Have excess income over your expenditure needs;
– Establish a pattern of this gifting as part of your normal expenditure; and
– Maintain your standard of living from the income remaining after the gift.
If you would like to discuss this or other inheritance tax planning options, contact Bronwyn Prior on 01245 228108.
This is not legal advice; it is intended to provide information of general interest about current legal issues.