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Ask The Legal Expert - Leaving An Inheritance Tax Bill To Your Children

View profile for Sean Boucher
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My wife and I are making Wills and we plan to give some money to the children now, before they inherit, to help them set up home. We’re nervous about tussling with the tax man, or causing problems for our children. What rules do we need to abide by?

You are wise to set out your Will and your wishes now, in good time, so your family can avoid complications further down the line.

You may have read recent media reports about HMRC investigating one in four estates for suspected Inheritance Tax (IHT) avoidance every year.

This revelation will, no doubt, prompt more people to call for reforms of the IHT system, to make it fairer and simpler to navigate.

As the system stands at the moment:

  • Everyone has a £325,000 nil rate band allowance for IHT purposes.
  • Since you are married with children you can double the nil rate band on the death of your spouse, provided the whole estate is inherited by the surviving spouse.
  • There is an additional Residence Nil Rate Band available for a residence, if it is left to a direct descendent. (For IHT purposes, the definition of Direct Descendants is quite broad, to includes foster children, step-children, grand-children and others).
  • The Residence Nil Rate Band is worth an additional £150,000 per person, rising to £175,000 per person in tax year 2020/21. This can be doubled upon the death of a surviving spouse.

You can give your children or other family members gifts of money, but you must plan this carefully to ensure it is tax free. In simple terms, as long as you live for more than seven years from the date of giving this gift, your family won’t have to pay IHT on it when you die. If you don’t they may be liable for IHT.

It is important to make a detailed record of what was given, to who and when. This will make it easier for your executor to assess what parts of your estate are liable for tax. This is a complex area of law and it is important to seek tailored legal advice.

JCP’s Lifetime Planning team is on hand for legal support. Call Sean Boucher on: 01267 248 986, or:

For further advice, please contact our specialist Lifetime Planning Solicitors in:

  • Swansea: 01792 773773
  • Cardiff: 02920 225472
  • Carmarthen: 01267 234022
  • Caerphilly: 02920 860628
  • Cowbridge: 01446 771742
  • Haverfordwest: 01437 764723
  • Fishguard: 01348 873671

The question posed is based upon a hypothetical situation.