IHTThe Need to Keep a Close Eye on the Value of Your Estate

9th March 2022
Recent research, conducted by the ‘resolution Foundation,’ has revealed that the value of inherited wealth, handed down to younger generations, is set to double over the next 20 years. This trend very much amplifies the need for people to fully appreciate the value of their estates and the need to plan ahead in order to reduce IHT (Inheritance Tax) payable on estates.

It is thought that escalating property values will see 6.5% of estates liable for IHT by 2026, based on the current IHT threshold of £325K. This marks a considerable climb from today’s 4.3%.

The report highlighted that the ‘offspring’ of the ‘baby boomer’ generation – those born in the 1940’s will see a 100% increase in inheritance wealth due to rapidly increasing property values and the use of ‘legal’ tax- avoidance tactics such as early gifting.

The report states that those born post 1980 will receive an average of £200K to £400K, with a typical age to receive a such an inheritance, being 61. However, many plan to make gifts to their ‘offspring’ far sooner. Experts, like estate planners, predict that early gifting is set to increase further because of rising house prices greatly increasing the value of estates coupled with wishes to help children get a ‘foothold’ on the property ladder.

Whilst lump sum gifts are often made, to help with the deposits for house purchases, these are liable to a tapered rate of IHT (Inheritance Tax) should the ‘Testator’ die within 7 years of making the gift. Given this, making a series of regular tax-free gifts, out of excess income, is becoming increasingly popular.

The latest ONS (Office for National Statistics) figures reveal that the trend for ‘gifting’ amounts have climbed dramatically. To illustrate this, the annual amount gifted rose from £9.2 billion in 2007 to £12billiob in 2017. This is a figure that is likely to have increased greatly after 5 years.

For further information on reducing your IHT liability by gifting, get in touch with the team here at Dunham McCarthy.

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The Need to Keep a Close Eye on the Value of Your Estate

The Need to Keep a Close Eye on the Value of Your Estate