Q. As a retired doctor who has inherited money from my father recently, I have more than enough for my needs. I find the theory of gifting money to my three children and grandchildren attractive to help them and to reduce Inheritance Tax. Is this wise?
A. This is becoming a more common scenario as wealth cascades down the generations. The answer is that it depends. The first step we would suggest you take is forecast how much money you will definitely need for the rest of your life. We do this by using a forecasting tool and it allows you to use ‘what if’ scenarios to ensure you would always have enough for yourselves, regardless of the circumstances.
Other points:
Being proactive with IHT planning can be extremely effective. An immediate issue here would be to take advantage of the Deed of Variance rules which state that you can alter a Will within two years of the death of the father.
So rather than all the wealth going straight to the doctor, it can bypass
a generation and be given directly to his children or grandchildren.
This would avoid the doctor gifting these monies, and if he died within seven years the beneficiaries being hit by IHT. These rules are called “Potentially Exempt Transfers”.
Secondly, make sure you set up the correct type of will. By doing so you will potentially save over £100,000 inheritance tax! (many people have reciprocal wills which have limitations).
If you’ve got a question you’d like to ask us just complete the form here and we’ll get back to you with an answer (if we publish it we’ll keep your name anonymous).
