Inheritance tax: retirees warn “it may make much more sense to give gifts” | Personal Finances | Finance
Carefully planned lifelong giving can be a useful tool to reduce inheritance tax (IHT) after retirement, she explained. Speaking on Legal and General’s Rewirement podcast, she continued, “It’s really important to think carefully about gifts.
“For a lot of people it can make a lot more tax sense to donate money while you’re alive, so make sure you understand the options.”
Inheritance tax is a tax on the estate of a deceased person, which includes their property, money or possessions.
Taxpayers can give up to £ 3,000 each tax year to their family and loved ones without it being added to the value of their estate.
She continued, “Many, many of our clients prefer to see their loved one benefit from what we call a living legacy.
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Ms McLeish added: “Financial advice can be very helpful for those who can access and afford it, but take a look at those with early inheritances.”
Under current tax rules, estates valued at a minimum of £ 325,000 must pay up to 40% inheritance tax.
This includes all the assets that a person leaves behind after death, including property and savings after deducting debts and funeral expenses.
However, if the person transfers part of their estate early, the overall value of the estate assets is reduced.
This can either bring it back below the threshold of £ 325,000 or, at least, reduce the amount of inheritance tax that has to be paid.
No inheritance tax is paid on gifts between spouses and civil partners, provided they live in the UK.
In addition, taxpayers can also offer wedding or civil ceremony gifts up to £ 1,000 under the exemption.
Everyday gifts, such as birthday or Christmas gifts, may also be part of the exemption.
However, taxpayers must be able to maintain a certain standard of living after making the donation.