Lifetime Giving – Wealth Management

With the Prime Minister, David Cameron, recently releasing his tax records and confirming lifetime gifts made to him by his mother, the question of Inheritance Tax has again stepped into the media spotlight.

It has emerged that following the death of his father in 2010, Mr Cameron was left £300,000 from his father’s estate. His mother then transferred two payments to David of £100,000 in May and July of 2011.  If his mother survives until July 2018 both gifts will be outside of her estate for Inheritance Tax purposes potentially saving her estate £80,000 in tax.

Outright gifts which are made more than 7 years before death, where no benefit is reserved, such as the gift to Mr Cameron are called potentially exempt transfers. On the expiry of the 7th anniversary from the date of the gift it no longer forms part of their estate.  Taper Relief may also apply after the 3rd anniversary if the gift is chargeable to Inheritance Tax and exceeds the Nil Rate Band which is currently £325,000.

Lifetime giving has always been a useful tool when estate planning for individuals. The timing of any gifts is obviously paramount to ensure that firstly the money is not required by the donor and secondly that they are likely to survive for the 7 years from the date of the gift.  Unfortunately none of us have the benefit of a crystal ball to determine when the gift should be made and only time will tell if the gift to David was a timely one!

For more details regarding lifetime giving and its effect on your estate please contact Lindsey Bohanna at [email protected] or by telephone on 0121 643 5531.