cash gifts

[160awsao1@land.army.mod.uk]

I understand that a maximum of £3000 per annum may be paid to children. What are the implications if I wished to give more?

[Arnold Aaro]

Hello Emily

If you gift more than the allowance (which is not exactly generous) and pass away within 7 years, Inheritance tax becomes payable. (This assumes your estate is worth more than £263k [allowance this tax year]).

A vehicle you may be interested in learning about which allows you to make larger gifts to reduce Inheritance tax immediately, yet retain some degree of access for yourself is a Discounted Gift Trust.

This would allow you to gift cash to your beneficiaries, although they would not be allowed acces to it until the inevitable happened to you.

However you must take an income (which is tax free within certain limits) FOR LIFE from the gift you have made.

The result is that on starting the trust and making the gift, the Inland Revenue class a considerable portion (e.g. 70% for a healthy 60yr old female) of the amount put into the Trust as being immediately outside the estate for Inheritance Tax purposes.

After 7 years the whole amount falls outside the estate, and you have then avoided Inheritance Tax on the complete gift. But of course you are still receiving the income for life.

Don't hesitate to e mail me or call if you want more info on this.

regards,

Arnold Aaron
Investment and Inheritance Tax Planner
Zurich Advice Network
e mail: arnold.aaron@zurichadvice.co.uk
Tel: (office) 0208 437 2500 (m) 07957 440 724

[I advise on Inheritance Tax Planning, and specialise in Discounted Gift Trusts and Investments]

[bob.fraser@towrylaw.]

Emily,
There is absolutely no law that prevents you from giving more than £3000 to your children. There is, however, the possibility of inheritance tax (IHT) being levied on the gift, but only if you die within 7 years AND if your total assets at death are more than (currently) £263,000.

If you are worried about IHT, then the situation is that if you have not made any gifts last year, you can give £6,000 this year (using up last year's gift allowance) and it will be exempt IHT.

[thurst]

The tax exempt £3,000 - can it be given to one person, or two people @ £1,500 each, or proportionately to more than two people, ie 10 people @ £300 each?