IHT planning – ideas for consideration

Individuals who wish to transfer wealth on to the next generation should consider making full use of their £3,000 annual exemption. If this was not fully used in the last tax year (2018/19), it can be used now provided the donor first fully uses their annual exemption for this tax year (2019/20). So, for somebody who has made no gifts, they can make gifts of £6,000 within their annual exemptions now.
For those who have income that is surplus to their needs, it may also be appropriate to establish arrangements whereby regular gifts can be made out of income in order to utilise the normal expenditure out of income exemption. An ideal way of achieving this is to pay premiums into a whole of life policy in trust to provide for any IHT liability.
Larger gifts could also be considered. Where ongoing control of the assets gifted is required, a discretionary trust will be useful, but care needs to be exercised so as not to exceed the available nil rate band. If the investor needs access to cash from the trust and IHT efficiency, a loan trust or discounted gift trust should be considered.
It may be worth revisiting IHT calculations for deaths occurring on or before 29 October 2018 to check if the correct method was used by HMRC in relation to the residence nil rate band. For options relevant to your financial circumstances please speak to your financial adviser.

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