What are the Benefits of Giving an Early Inheritance
The concept of inheritance tax has been widely discussed for years now, with this incredibly controversial levy having faced extinction on multiple occasions.
To this end, HMRC raked in a staggering £448 billion from taxpayers through the last financial year, with inheritance tax (IHT) receipts peaking at £4.1 billion between April and November alone.
This is £600 million more than the same period 12 months ago, creating a significant tax burden for grieving family members.
In this respect, giving an early inheritance may be beneficial for estate owners. But what are the precise benefits of this?
#1. Reduce Your Overall Tax Burden
In the world of inheritance and IHT, there’s a concept commonly referred to as ‘gifting’. This describes the process of giving assets within your estate to beneficiaries before you pass away, rather than distributing it at a later date and following your death.
In cases where you gift parts of your estate at least seven years prior to your death (which is hard to organise, we’ll grant you), such assets will not be subject to IHT and the beneficiary will be able to realise their full value.
Of course, this can also reduce the size of any fees associated with the eventual distribution of your estate (including probate or admin levies), while simplifying this process and easing the burden of managing assets by others after your passing.
#2. Gift Assets When They’re Needed the Most
This leads us neatly onto the timing of your gifts, as distributing parts of your estate early can also ensure that your beneficiaries receive much-needed cash or assets during periods when they’re most needed.
According to Key, Q3 of 2021 saw a growing number of people leverage their equity release mortgage to gift an early inheritance, with 61% of respondents to a survey claiming to do exactly this.
In total, 43% of the equity released during this period was used for house deposits, while a further 36% was used to provide an early inheritance to beneficiaries.
These numbers highlight the merit of releasing capital early, as much of this capital will have been used to secure a footing on the property ladder as either a first-time or new buyer.
#3. Reduce Familial Conflict
Unfortunately, the administration of wills can be a stressful and emotionally testing process, while particularly complex and large estates can even create conflict in certain families (particularly those that are estranged).
Once again, however, if you’re able to give parts of your estate early and in separate transactions, you’ll ease the future administration process and reduce the potential for familial conflict after you’re gone.
This is a huge benefit for estate owners, as the last thing anyone wants is for loved ones to fight and class over your assets in the event of your death.
*This is a collaborative post.
