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Transferring assets to loved ones as a gift can be a convenient and effective way of providing for your family’s future without incurring a significant Inheritance Tax charge in the event of your passing. However, the law around this process can often feel complex, with strict thresholds in place to limit the amount that can be gifted without triggering a charge.
As such, those looking to gift a property or other assets should always seek legal guidance from expert solicitors, who can talk you through the legal terms and conditions to consider, and help you make tax planning decisions that maximise the benefits you are able to pass on to your loved ones.
At JMW Solicitors, our wills, trusts and estate planning team has the expertise and experience to help deal with all aspects of gifting. Call us today on 0345 872 6666, or complete our online enquiry form to request a call back at your convenience.
How JMW Can Help
We have one of the most respected wills, trusts and estate planning teams in the sector, with a strong understanding of the legal issues you will be facing and a commitment to providing you with honest advice that places your best interests at heart.
Our team can advise you on all aspects of gifting, including tax-free allowances and exemptions, charitable gifting, gift allowance limits, and whether the use of a trust or a corporate structure might offer additional benefits for providing gifts to family members. By seeking our advice, you will be able to come to educated decisions about your estate planning.
We have been recognised in the prestigious Legal 500 and Chambers and Partners guides on numerous occasions, with Chambers praising us for our “communicative and enthusiastic approach” and our dedication to offering “practical solutions to [our] clients’ legal needs, producing the highest-quality results”.
By discussing your needs with JMW, you can get legal advice on gifting that aligns with industry best practice. Our expertise is such that our solicitors are often asked to give seminars on wills, trusts, Inheritance Tax and estate planning, and several of our lawyers are also members of the highly-respected Society of Trust and Estate Practitioners (STEP) and Solicitors for the Elderly (SFE).
If you are looking for a solicitor who can help you with all legal aspects of gifting property and assets, contact JMW today. Call us on 0345 872 6666, or fill in our online enquiry form to request a call back.
What qualifies as a gift in legal terms?
In the eyes of the law, a gift needs to be given freely and without conditions, meaning you cannot continue to derive any benefit from the asset. For example, signing a property over to family members while continuing to live there rent-free would not be considered a legitimate gift, and would be calculated as part of your estate for Inheritance Tax.
What type of gifts are exempt from Inheritance Tax?
Inheritance Tax exemptions for gifts generally fall into two main categories; firstly, there is no tax to pay on any gifts made by a person up to the value of £3,000 in a tax year. Anything above that amount will be added back into your estate if you do not survive seven years after the gift was given; if the value of gifts in a given year totals less than £3,000, the leftover exemption can be carried over into the next year.
Secondly, small gifts up to the value of £250 given to any individual are also exempt from Inheritance Tax, even if you do not survive seven years after the gifting. This means you can give £250 to as many people as you want in one year without incurring extra cost, with the exception of recipients who have already received a gift worth the entirety of the £3,000 annual exemption.
Other potential exemptions include:
- Wedding gifts - these need to be made before the wedding, with the permitted valuation threshold varying depending on the recipient’s relationship to the giver
- Gifts to help with living costs - these can potentially be exempt from Inheritance Tax when given to an ex-spouse, an elderly dependent or a child under 18 or in full-time education
- Gifts from surplus income - these need to be well-documented and given regularly
- Political party gifts - Inheritance Tax-free gifts can be given to political parties under certain conditions
Can you gift a property to a family member?
Transferring ownership of a property to a family member as a gift with no money exchanging hands requires you to fill in TR1 and AP1 forms. Provided that you live for at least seven years after making the gift, it could mean the property is no longer considered part of your estate when Inheritance Tax is calculated.
However, you cannot continue living in the property after gifting it unless you are willing to pay rent at the going rate, or else it will still be seen as part of your estate. Moreover, your family member may need to pay Capital Gains Tax on the property if it has not been your main residence for the entire time you have owned it, as well as Stamp Duty if there is an outstanding mortgage on the property.
Due to the legal complexity involved in transferring a property as a gift, it is advisable to contact a solicitor to understand the full implications.
How do gifts to charity affect Inheritance Tax?
Gifts left to charity are completely free of Inheritance Tax, whether they are made during your lifetime or upon your death. Additionally, if you leave at least 10% of your chargeable assets to charity in your will, the rate at which Inheritance Tax is charged on the rest of your estate will be reduced from 40% to 36%.
Talk to Us
If you are looking for a solicitor to further explain the legal complexities involved with gifting, contact JMW today. Call us on 0345 872 6666, or fill in our online enquiry form to request a call back.