CHRISTMAS OFFER Subscribe to Hertfordshire Life today CLICK HERE

Leg up without a handout: legal advice on helping offspring without more tax bills

PUBLISHED: 09:08 10 March 2016

Financial support can be given to family without having to pay tax

Financial support can be given to family without having to pay tax

Archant

We want to give our offspring all the financial support we can, but fear of tax can be off-putting. Susan Glenholme, partner at Debenhams Ottaway 
solicitors in St Albans, looks at how to help without paying more

With many people living longer and the younger generation unlikely to be as well off as their parents, helping our children and grandchildren financially is increasingly common. Concerns about inheritance tax however have put some people off, but there are a number of inheritance tax exemptions of which people are unaware or are not taking advantage.

Surplus income gift

One method is to ‘gift out of surplus income’ and as long as you meet the basic statutory requirements, it should not be subject to inheritance tax. For example, helping towards school or university fees. It is important that the payment is made out of income and not capital and you are able to maintain your usual standard of living once a gift has been made. A gifting pattern is needed and good records kept. With the right legal advice it is an effective means of limiting inheritance tax obligations.

Capital gift

You can also gift outright from capital. Provided a person survives for at least seven years after making this gift, it is completely outside their estate for inheritance tax purposes. Gifts up to £3,000 in any one tax year can be made plus any unused balance of £3,000 from the previous tax year. Outright gifts in any tax year up to a total of £250 each to any number of people are exempt, as long as they have not received the £3,000 exemption above.

Up to £5,000 as a wedding gift can be given to each child (including step-children and adopted children) or the person your child is marrying, or, £2,500 to grandchildren, and up to £1,000 to anyone else. Payments for the maintenance of a spouse, ex-spouse, dependent relatives and, usually, children who are under 18 or in full-time education are also considered outright gifts.

Spouse bypass trust

Death in service benefits are not usually considered an asset of the estate for inheritance tax purposes as they are paid at the discretion of the trustees. Once they pass into the surviving spouse’s estate for example, they will be liable to inheritance tax when the spouse dies. A ‘spousal bypass trust’ can avoid this problem by including the surviving spouse and children. The trust will be subject to an inheritance tax charge every 10 years and exit charges but these charges are currently much less than the inheritance tax charge on death. These trusts are not limited to death in service benefits and can be done at the same time as a will.

For more information on inheritance, call 01727 735636 or email sg@debenhamsottaway.co.uk

0 comments

Welcome , please leave your message below.

Optional - JPG files only
Optional - MP3 files only
Optional - 3GP, AVI, MOV, MPG or WMV files
Comments

Please log in to leave a comment and share your views with other Hertfordshire visitors.

We enable people to post comments with the aim of encouraging open debate.

Only people who register and sign up to our terms and conditions can post comments. These terms and conditions explain our house rules and legal guidelines.

Comments are not edited by Hertfordshire staff prior to publication but may be automatically filtered.

If you have a complaint about a comment please contact us by clicking on the Report This Comment button next to the comment.

Not a member yet?

Register to create your own unique Hertfordshire account for free.

Signing up is free, quick and easy and offers you the chance to add comments, personalise the site with local information picked just for you, and more.

Sign up now

More from Hertfordshire Life

Inspired by steampunk and Photoshop, amateur photographer Gary Nicholls embarked on an epic challenge to create a trilogy of lavish photo novels

Read more
November 2018
Yesterday, 13:09

250 years ago this month a baron’s servant smashed down a bedroom door in St Albans’ White Hart Inn to find a prince in bed with his master’s wife. Cue a court case, a delighted press, and much airing of royal underwear

Read more
November 2018
Yesterday, 12:26

Christmas isn’t complete without a trip to a festive fair. From German-style food stalls to vintage fetes, Hertfordshire’s Christmas markets have it all

Read more
Thu, 10:10

Don’t miss the December issue – everything you need for a fabulous Herts Christmas!

Read more
Wednesday, November 7, 2018

Indulge in the very best of pub classics every Wednesday night at The Black Horse.

Read more
Friday, November 2, 2018

It’s that time of year again and we have our special T-BONE steak offer!

Read more
Wednesday, October 31, 2018

From Hertford to Flanders, a young army chaplain kept a vivid record of his experiences in the First World War. Sarah Reay tells her grandfather’s remarkable story

Read more
November 2018
Wednesday, October 31, 2018

This year marks the 100th anniversary of the end of the First World War, so we’ve gathered some Remembrance Day events taking place in the county

Read more
November 2018
Wednesday, October 31, 2018

If you’re looking for things to do in Hertfordshire this month, we have gathered lots of events for November 2018

Read more
Wednesday, October 31, 2018

We quiz author Kevin Exley about his new book that takes the reader on the trail of fascinating stories, new and old, around Berkhamsted

Read more
October 2018

Newsletter Sign Up

Sign up to the following newsletters:

Sign up to receive our regular email newsletter

Our Privacy Policy


Topics of Interest

Food and Drink Directory

Local Business Directory

Search For a Car In Your Area

Property Search