We acted for Dr L who had an estate worth £2 million. He had more than enough assets and income for his retirement needs and agreed to make lifetime gifts of £125,000 cash to each of his 4 children. He had considered trusts for them, but was satisfied that they were responsible with money, and that the gifts would be useful in reducing their mortgages to make it easier for them to pay school fees. His daughter was about to marry, and therefore Dr L and his wife each gifted an additional £5,000 to her which was immediately exempt for IHT. The remaining gifts would fall outside of his estate after 7 years. Dr L was advised to consider taking out life insurance to cover the potential IHT liability on his estate if he died within the 7 year period, as the gifts would then become taxable ( after setting off his nil rate band allowance which would have been used up in full). A policy was set up using a discretionary trust for the death benefit so that IHT would not be payable on the money that the insurance policy paid out.
We acted in an estate where Mr C's assets totalled £700,000, but Mr C's wife had died before him and left her estate to him. This meant we could claim 2 nil rate band allowances, totalling £650,000, to reduce his estate to £50,000 for IHT purposes. However, Mr C had also made large gifts in the preceding 7 years, including paying premiums on life insurance policies, which exceeded the annual exemption of £3,000. These would have been added to his estate thus increasing the amount subject to IHT from £50,000 to £150,000. This would have increased the IHT bill by £40,000. However, we advised the family that these payments had been made regularly , and after analysing Mr C's bank statements for the 7 year period, we were satisifed that gifts had all been made out of disposable income. The family agreed that he had intended to make these gifts regularly, and having checked My C's papers he clearly intended to make these gifts from his disposable income. We therefore claimed IHT relief when accounting to HMRC and successfully claimed the reduction in IHT of £40,000.
We acted for the children of Mrs C who inherited the family home. The home had great development potential, and had risen considerably in value in the 12 month period after her death. The demand for the property meant that it sold for £110,600 more than its value for probate. Having agreed the date of death value with the district valuer for IHT purposes, the gain in value since death would have been subject to CGT at 28%. After transferring interest to the children before selling, it was possible to make use of their CGT annual allowances, their losses, and their lower tax rates (18%), and also the non resident status of one of the children, to avoid incurring any capital gains tax liability. This saved the family CGT of about £28,000.