Latimer Hinks says that Christmas can be the ideal time to give a monetary gift that will also help to off-set the potential burden of Inheritance Tax (IHT.)
Natalie Palmer, Solicitor Partner at Latimer Hinks, said: "The festive period might not be the best time to think about IHT, which is often colloquially known as the death tax. Nevertheless, the fact is that a monetary gift could help out cash-strapped children, grandchildren and other relatives and can be beneficial for IHT purposes.
"You can give away £3,000 per annum - or £6,000 if you have not used the £3,000 allowance in the previous tax year - and this will not be taken into account on your death. You can also give away £250 to any other individuals by way of the small gifts annual allowance.
"Perhaps, the most useful rule is that regular cash gifts out of surplus income will not be taken into account when you die. If, for example, you receive £1,000 per month net income surplus to your needs, you can give £1,000 to your adult children each month without it being classed as a gift upon your death. The regularity of payments out of income is most important.
Natalie added: "All outright gifts made more than seven years before the donor dies are free of IHT. However, if you reserve any benefit from a gift such as continuing to live in a house you have given away thenHM Revenue Customs (HMRC)may apply gift with reservation rules, so that for IHT purposes the asset will still be part of your estate when you die; even if that gift was made more than seven years ago.
"You may ask whether anyone would find out about any gifts you have made. Perhaps not, but when you die your executors or personal representatives who are often those to whom you have made the gifts - will need to make declarations to HMRC. Failure to make full disclosure can lead to very severe and serious penalties and consequences. Equally, it has been known for HMRC to request copy statements for bank accounts which may have details of the gifts.
Latimer Hinks solicitors, based in Darlington, has a team of around 40 people serving private and corporate clients. Their range of expertise and services covers legal issues surrounding commercial, residential and agricultural property, wills and lasting powers of attorney, trusts, probate, long-term care, tax planning, commercial law, alternative and renewable energy, property, business rescue, employment, and land-owning.