Leaving money, property and possessions in your Will to your loved ones after your death seems like a natural thing to do. However, is it a good, or even a better idea to make some of these gifts to friends and family during your life rather than waiting until you’re gone?
Giving inheritance early
There are multiple benefits of gifting your inheritance to your adult children during your life rather than waiting for it to be passed on in your Will. For one, you will be around to see the enormous difference your gift is going to make to the lives of your loved ones.
This will mean that you can enjoy your gift with them and it can be a happy thing, rather than waiting until your Will is read out after your death and it being a much more sombre affair.
Statistically, adults in their late 20’s and early 30’s are the ones who could really benefit from a financial boost such as a gift from a Will. This is the time in their lives when they are likely to have recently bought or be thinking of buying a home, have young children and still be working their way up in their career. So a gift at this stage of their life could be huge for them.
If you wait and leave it in your Will, then it is likely they will be far older, have already paid off their mortgage and not be in any real need for the money, and therefore it may end up being passed on directly to their children in their own Will in the future.
However, before making any decisions, it is important to seek legal advice before making these types of gifts.
Benefits to giving inheritance early
There are also some more practical reasons why you may wish to gift your loved ones before your death. This can include minimising the amount of inheritance tax they will have to pay.
What is inheritance tax?
Inheritance tax is a tax paid on the estate of someone who has died. The estate means all that person’s money, property and possessions.
How much Inheritance tax will I have to pay?
There’s usually no inheritance tax to pay if the value of your estate is below the threshold of £325,000 or your Will leaves everything above £325,000 to your spouse or civil partner, or to a charity or certain types of community group. However, this may not be the case when leaving money to your children.
The inheritance tax rate is currently set at 40%, but this is only payable on the part of your estate which is above your threshold.
Annual gift allowance
Each person has a personal annual gift allowance of £3,000 each every year that they can use to gift as they please. This is known as your annual exemption. This allows you to give away money or possessions up to the value of £3,000 without it impacting the value of your estate for Inheritance Tax (IHT). However, this is £3,000 for the full year, you cannot gift multiple people £3,000 each.
If you would like to discuss your options in more detail, then please call and speak to one of our specialist family law solicitors on 0800 614 722 to make a 20 minute free initial consultation. Or for more information on our legal services, please visit our pages here.