Passing on wealth to loved ones is an important aspect of wealth management.
At Four Wealth Management, a Financial Adviser can help you to transfer your wealth to your chosen beneficiaries through Estate Planning. Effective Estate planning can reduce or even eliminate the Inheritance Tax liabilities your family could face.
Many people want to reduce their Inheritance Tax liability but are worried about gifting too much away too soon, not knowing when they should start reducing the value of their estate, losing control over their money or even potentially needing the assets in future if unexpected costs arise such as long term care.
At Four Wealth Management, you can book a no-obligation meeting with a Financial Adviser who will advise you on estate planning and inheritance tax issues to help achieve the most effective transfer of wealth to your loved ones.
Find out more about transferring your wealth
What are my options to gift assets?
There are various options available to you when it comes to transferring your wealth to your loved ones.
There are three main time frames to be aware of when it comes to transferring your wealth: immediate, 2 years and 7 years.
The seven-year Inheritance Tax rule
Most people have heard that assets need to be gifted seven years before death to be free from Inheritance Tax. This is true for some types of gifting but not all. At Four Wealth Management, you can book a no-obligation review with one of our Financial Advisers to determine which types of gifting are suitable for your circumstances.
What is the seven-year rule?
Some gifts are not exempt from Inheritance Tax or immediately chargeable. They are instead potentially chargeable gifts. This means if you survive seven years after making the gift, it is entirely exempt from Inheritance Tax.
If you die before the seven years, the gift becomes liable to IHT on a sliding scale starting at 40% if you die within 3 years of making the gift.
Gifting that is immediately exempt from Inheritance Tax
Some gifting is immediately exempt from any Inheritance Tax liability.
For example, you can give small gifts of £250 to whomever you choose free from IHT.
Annual exemption
Each tax year, you receive an annual exemption that you can gift to whom you choose. In the 2020/21 tax year, this is £3,000. You can carry any unused exemption forward for one year. This means if you didn’t use any of the 2019/20 tax year allowance you can give £6,000.
Regular gifts from income
One exemption that is commonly overlooked that is immediately free from Inheritance Tax is regular gifting from excess income.
If you can prove that you have excess income that you can give away to your loved ones without affecting your currently lifestyle, you can make monthly gifts to your chosen beneficiaries.
Wedding gifts
Gifting money for a wedding is exempt from Inheritance Tax. The limits are up to £5,000 to your child, £2,500 to a grandchild or great-grandchild and £1,000 to anyone else.
Find out more about Inheritance Tax planning
Is your Will up to date?
When advising on Estate Planning, your Financial Adviser will discuss the importance of you having an up to date Will. A Will is a document that states what you want to happen to your estate when you die. Your possessions, property, pensions and money are all part of your estate.
A Will is vital in Inheritance Tax (IHT) planning and it is important to ensure it is planned correctly and well written to avoid ambiguity. Mistakes in your will could leave your relatives with high legal fees.
Find out more about writing a Will
The levels and bases of taxation and reliefs from taxation can change at any time. The value of any tax relief depends on individual circumstances.
Will writing and Powers of Attorney involve the referral to a service that is separate and distinct to those offered by St. James’s Place and along with the Trusts are not regulated by the Financial Conduct Authority.
