Q&A - Can I gift my inheritance to keep my own estate below the IHT threshold?

Q:    I have just inherited from my uncle’s estate. I drafted my own Will some time ago and recall being advised that my estate could potentially exceed inheritance tax thresholds. I would therefore like to pass on my inheritance to my children instead. What is the best way for me to do this? 

A:    You could make a gift of all or part of your inheritance to your children. However, you will need to survive making the gift by seven years, otherwise it will be considered as part of your net estate for inheritance tax purposes.

A more tax efficient alternative is to make the gift using a deed of variation which will redirect the inheritance you are due to receive from your uncle’s estate to your children. The benefit of using a deed of variation is that the gift will be treated as having been made by your uncle to your children rather than by you.

By using a deed of variation, the value of the gifted inheritance will not be considered part of your estate for inheritance tax purposes so there is no need to survive the gift by seven years.  

It would be a good idea to speak to a private client solicitor to discuss the options available to you and in particular the specifics. A Deed of variation may not be suitable in all circumstances as you may be losing out on the benefit of one of the exemptions that can be applied to a gift if you vary it. Therefore it is always a good idea to take specialist advice. Please also remember that a deed of variation needs to be signed within two years of the deceased passing away.

Article 31/08/2020

This question has been answered by Ulia Choudhry, a Solicitor with GHP Legal.  If you would like to speak to someone about this or any other legal matter it is still possible and we are doing everything we can to ensure that we continue to offer our high levels of service to our clients.  In accordance with government guidelines, some of our lawyers are currently working remotely which means you may not now receive a response as promptly as you may expect. Please kindly bear with us and we will respond as soon as we are able.

Where possible, we ask that you communicate with us by phone or email. If you have a new enquiry, please use the ‘Contact us’ form on the website or call Wrexham 01978 291456 or Oswestry 01691 659194. As a firm, you will appreciate that we are still extremely busy, and due to current circumstances work may be interrupted – however cases are still ongoing and will be prioritised by urgency and need. Stay safe and thank you for your support.

Ulia Choudhry

Ulia Choudhry

Solicitor

Part of our Probate, Wills, Tax and Trusts team in Wrexham

Victoria Wilson

Victoria Wilson

Partner

A Partner and Head of our Probate, Wills, Trusts and Tax team