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Family wealth 
There are many ways of ensuring the taxman does not get a cut of your worldly goods. Parents and grandparents should give early and give often, if they want to keep family wealth beyond the grasp of the taxman.
IHT allowances Each year, you can take advantage of inheritance tax (IHT) allowances to minimise your estate and cut back on the taxman's take. The key is to think ahead. An individual can give away £3,000 a year to friends and family, and if this is overlooked one year, £6,000 can be given away the next year. In addition, you can give £250 a year to an unlimited number of people - so Christmas and birthdays provide excellent IHT planning opportunities. With each £100 given away, you potentially save £40 in IHT. As people who are married or part of a civil partnership each get their own allowance, they can potentially double their IHT savings. Potentially exempt transfers You can make unlimited gifts of cash, property or other assets to family and friends, known as "potentially exempt transfers", but must then survive for seven years for the gifts to be completely free from IHT. However, you will see a benefit earlier, because after just three years the IHT levied on assets exceeding the nil rate band drops from 40 per cent to 32 per cent and then gradually reduces to zero after seven years. For these arrangements to work, it is vital that the donor retains no benefit in whatever is being given away. Take care with gifts of assets other than cash, as they may be liable for capital gains tax if, for example, the shares or property have significantly increased in value. Regular gifts from income You can also make regular gifts from surplus income, as opposed to capital, to cover anything from school fees to mortgage payments. As long as payments do not reduce your standard of living, payments will be treated as regular expenditure out of income and therefore will come out of the IHT net immediately, without waiting for seven years. You may need to prove regularity of gifts in order to get IHT benefit. Parents or grandparents who would like to put IHT planning into practice can get children off to a particularly tax-efficient start in life using Child Trust Funds or stakeholder pensions. Child trust funds In addition to any IHT benefits, Child Trust Fund (CTF) accounts allow any income or gains to add up tax-free until the child can access the money at 18. The Government has provided £250 vouchers to all children born on or after September 1, 2002, with another £250 promised at age seven, and speculation about a third contribution during secondary-school years. You can give £250 each as gifts to your grandchildren, and it takes the money right out of your estate. Stakeholder pensions Grandparents who appreciate the need for income in retirement can also pay up to £2,808 a year into a stakeholder pension for their grandchild. Not only will the payments be free from IHT but, as an added incentive, the contribution will be topped up with basic-rate tax relief to £3,600. There is income tax relief on the contributions you invest, all capital gains are tax-free, and there are IHT benefits where the £3,000-a-year annual gift allowance is available to be used. Payments as part of regular expenditure from income should also be exempt from IHT. However, this really is an example of very long-term financial planning. At present, pension cash can only be accessed at the minimum retirement age of 50, but this limit is set to increase to 55 from 2010. If you require any further information about the services that we provide or would like to review your financial planning position, please contact us |