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12th July 2019

IHT exemptions – it pays to take advice early

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Hauke Harrack, a Senior Solicitor in Hewitsons’ Private Wealth team, was recently instructed on an estate where the deceased made numerous lifetime gifts in the seven years before her death, totaling around £1.3m. Lifetime gifts can cause great complexity and extra work in an estate administration. Fortunately, in this case, the deceased and her children had received legal advice from Hewitsons on lifetime gifts a few years earlier. This was to ensure that, on her death, the deceased’s executors (her children) would be able to make full use of the various Inheritance Tax exemptions available to her estate, by correctly structuring (and recording) the proposed gifts.

As the deceased was in receipt of substantial income, surplus to her requirements, the Normal Expenditure Out of Income Exemption (with no upper limit) became the most valuable to her estate.

In accordance with Hewitsons’ earlier advice, the deceased and her children had kept detailed records of all gifts made, her income and expenditure, and her intention that the regular gifts should be made out of her surplus income. This enabled the executors to make a strong case to HMRC for the exemption to be granted on most of the gifts made. Other exemptions were claimed too, leaving around £220,000 worth of gifts not covered by exemptions. Although the deceased’s Nil Rate Band covered the rest, it would not have covered the others in full.

HMRC accepted the claims without raising any queries, so that the executors could distribute the estate to the beneficiaries earlier and at a lower cost, and in the knowledge that they had saved in excess of £400,000 of Inheritance Tax – simply by having made sure that their mother had taken advice and structured her lifetime gifts appropriately.

If you wish to discuss lifetime gifts and how these may be covered by Inheritance Tax exemptions, contact one of our solicitors for more information. You may just be able to save yourself and your loved-ones a small fortune.

Cambridge - Elizabeth Herbert - 01223 461155 or click here to email Elizabeth
Northampton - Hauke Harrack - 01604 463131 or click here to email Hauke
Milton Keynes - Carolyn Bagley - 01908 247015 or click here to email Carolyn
London - Francesca Rossi - 020 7400 5037 or click here to email Francesca