Lifetime Tax Planning

Our inheritance tax planning solicitors can help you to reduce the amount of inheritance tax your loved ones will have to pay by guiding you through lifetime tax planning options.

Making lifetime gifts of your surplus income

The ‘normal expenditure out of income’ exemption from Inheritance Tax allows lifetime gifts of an unlimited amount provided they meet the qualifying criteria.

A claim for this exemption is made following the death of the donor and if the claim is successful the gifts made will not form part of your estate for Inheritance Tax purposes.

For gifts to qualify, you must be able to show that the payments are made out of your ‘surplus income’, which can include employment income and investment income.

You may gift the surplus income direct to individuals or to a lifetime trust for a group of beneficiaries.

Use of lifetime trusts

A useful tool for Inheritance Tax (IHT) planning is the use of lifetime trusts as they have beneficial qualities, such as the ability to retain control of the assets given away, tax benefits, asset protection and second generation IHT planning.

By making a gift of assets to a trust for a group of beneficiaries (e.g. your children and grandchildren) rather than outright to individuals, the assets are protected by reducing the risk that the assets will be lost in the event of divorce or bankruptcy of the individuals.

Trusts are useful for second generation IHT planning as the assets held in trust are also outside of the estate of the beneficiaries for IHT purposes, meaning that they will not increase their own IHT liability on death.

Disabled person’s trust

You may set up a disabled person’s trust for someone either as a lifetime trust or in your Will on your death. The Trust must meet statutory requirements have tax advantages for inheritance tax, income tax and capital gains tax.

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