Inheritance tax "gifting" warning issued by expert

Date: 6th August 2009

Inheritance tax payments can kick in prior to the estate holder's death if large portions of an estate are "gifted" to younger generations, a financial expert has pointed out.

Speaking today, Equity Partners managing director Kevin Tooze pointed out that people can face new taxation if they transfer out funds over a certain amount.

Current inheritance tax laws levy 40 per cent on estates, above a threshold of £325,000.

This includes assets held in an estate when the holder died, as well as those gifted up to seven years before the debt.

Mr Tooze warned that those who "gifted" above the £325,000 threshold would face so-called lifetime gifting taxation.

Effectively, this means that the estate owner would pay inheritance tax on the gifts while they are still alive.

"Don't fall foul of gifting more than the middle rate band, otherwise you could fall foul of lifetime gifting taxation, and a periodic ten year tax on that money as well," Mr Tooze said.

"With very, very large gifts you have to be careful."