You may gift £3,000 annually without tax implications. Gifts in excess of this figure may be referred to as a potentially exempt transfer (PET). This means that providing you survive for 7 years from the date of the gift, it falls completely outside of your estate for tax purposes.
If your intended beneficiaries are, in your opinion, too young you may gift into a trust for their benefit rather than making an outright payment to them. Trusts vary in type and are selected then recommended according to your particular wishes.
Income from Gifted Capital
It is possible to gift your capital into a trust for named beneficiaries but still retain a regular income from it. In addition, many will qualify for a discounted gift trust where, providing that you pass a medical underwriting process, a noticeable percentage of the gifted capital will be removed from your estate immediately (followed by the balance after 7 years).
Should you die before age 75, the value of your pension funds (up to a maximum of £1.8m currently) may be paid as a lump sum to nominated beneficiaries outside of your estate and free of inheritance tax.
It may be possible to take out a life policy that pays out on your death at any time. The policy would be written subject to a trust wording for your named beneficiaries. On death, the sum assured passes into the trust, outside of your estate. This option is less expensive for married couples where the policy is written so that it pays out on the second of the couple to die – as this is when the tax becomes due.
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