In an attempt to avoid the inheritance tax, half of the United Kingdoms pensioners are planning to gift away a combined total of £103billion to friends and family. Over 40 percent of the United Kingdoms households have an estate that would be liable for the inheritance tax of 40 percent, which would be payable on the death of the last parent.
Most of the pensioners would like the gifts to be used to help relatives onto the property ladder; others said they would like to help them in their own retirement.
Our view
Giving money away is fundamentally flawed. If the settlor i.e. the person making the gift were to die within seven years of making the gift, then some or all or value may be included in the inheritance tax calculation. As many of the people who would receive the gift, could plan to use the money to clear their own debts or spend it, perhaps they would not then be in a position to pay the inheritance tax bill anyway. In addition, for care fees planning, should you ever need care in the future, the local authority may try to prove that you were giving away assets to avoid paying for care. The money could then be claimed back from the beneficiaries with no time limit.