Gifting to Others- Simplification Will Help Bereaved

Currently, less than 10% of families, required to complete lengthy and complex reporting of a deceased loved one’s estate, owe any tax to the Government.  Yet they face a mountain of forms and the added distress of finding information on the assets and investments owned by their loved one. This adds to delay in completing probate, the formal legal process which enables the assets of the estate to be distributed once any tax due has been paid. 1   

The reforms intended to remove 90% of estates which owe no tax from the need to report to HMRC will take effect from January 2022.

How to Make It Easier

There are other steps which families may take to make the process of passing down family wealth less stressful for the bereaved.

These include: -

  • Making a will.
  • Reviewing and updating the will if family circumstances change.
  • Ensuring that records of savings, investments, life policies and loans are up to date.
  • Recording any lifetime gifts made, so that it is clear whether they are taxable or tax exempt.
  • Ensuring that pension scheme nominations are up to date.
  • Considering whether the inheritance tax liability may be reduced, or provision made to pay it.
  • Balancing the needs of several generations when deciding when and how much to give away.

Steps to Take Now

  • Without a will the law of intestacy decides who gets what. This may mean relatives who the deceased did not wish to benefit receive a share. It is particularly problematic for couples who are cohabitants as they have no automatic right to inherit if there is no will.
  • Reviewing the will periodically, especially when family circumstances change, following births, death of intended beneficiaries or after divorce or marriage is essential.
  • Keeping up to date records of all assets, investment and loans makes life easier for your executor and ensures that hard earned savings do not become part of the £15 billion of dormant assets currently unclaimed.
  • Making gifts during one’s lifetime can reduce the eventual tax bill and enable younger generations to benefit sooner. Some gifts are exempt from inheritance tax immediately, whereas others will remain in the estate, so keeping a record of gifts made makes probate easier and avoids disputes with HMRC.
  • Pension pots and lump sum death benefits don’t form part of an estate and are not usually subject to inheritance tax. It is important to name the intended beneficiaries of these and to keep nominations up to date so that the deceased’s wishes can be considered by the trustees who will distribute them.
  • Some lifetime gifts made are exempt from inheritance tax  if certain conditions are met, others may become exempt once 7 years have elapsed, with tax reducing after 3 years. Others are subject to an immediate charge. In some cases, capital gains tax may also be payable.

Planning how to make lifetime gifts and recording these can reduce the eventual taxable estate. It is also important to consider amounts and timing of gifts made so that they are  affordable for  the donor and at the right time to  the recipient.  

Help at Hand

Aspira offers advice and access to services to help families consider all aspects of inter- generational gifting. We are also here to provide support to the family to ensure that wishes are fulfilled, and wealth is preserved.

This includes: -

  • Planning of a lifetime gifting and legacy strategy which takes account of the needs of all the family, making use of the allowances and reliefs available to achieve tax efficiency
  • Help with will writing via our bionic will service providing online and virtual access to a solicitor to draft wills and trusts.
  • Ongoing valuations of your assets and investments so these remain up to date
  • Advice on the tax efficient use of pension scheme assets, including passing these on to others after death
  • Arrangement of life assurance and trusts to provide for the likely inheritance tax liability.
  • Ongoing support for the family while dealing with probate and beyond.

To discuss your plans to cascade wealth to younger generations and ensure that your affairs are up to date, please contact your usual Aspira adviser, or email or call 0800 055 6585.

Kay Ingram                                 
Public Policy Director                           
March 2021

1 Treasury statements accompanying tax day announcements March 2021

Please remember, no news or research item is a recommendation or advice to buy. Aspira Corporate Solutions is not responsible for accuracy and may not share the author’s views. The contents of this blog are for information purposes only and do not constitute individual advice. All information is based on our current understanding of taxation legislation and regulations. The Financial Conduct Authority does not regulate estate planning, tax advice, wills or trusts. 

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