It is understood that the baby boomer generation, those born between 1946 and 1964, have over 50% of Britain’s wealth and many are on the path to having a comfortable retirement. Baby boomers are therefore now looking at ways to help their children to get onto the property ladder through cash gifts and other forms of gifting.
Typically, a large cash gift to a child will be treated as an exempt transfer, which means that the donor needs to live for at least 7 years for the value gifted to fall outside of their estate.
Inheriting from a relative
If a baby boomer is expecting an inheritance from an elder member of the family, then there may be an opportunity for them to provide a more tax-efficient way of assisting their children. When a member of the family passes away, they will usually have a Will which instructs the executors of their estate as to who the assets should be distributed to.
UK tax law provides a beneficiary of an estate to re-direct their interest in the estate to another person. The is known as a deed of variation. A deed of variation will therefore provide a baby boomer the ability to redirect their interest to their children instead.
The advantage of entering into a deed of variation is that they will not be deemed to have made a gift to their child. This is because the money will be distributed directly from the deceased’s estate.
The deed must be completed within two years following the death of the family member. Please note the advantages of using a deed of variation will depend on various circumstances and therefore professional advice should be sought.
If you have any queries on Inheritance Tax then please do not hesitate to get in touch with Dan Tomassen.