Members of the public are avoiding punitive inheritance tax by bequeathing portions of their estates before death, as research shows that almost half claim to have received pre-inheritances gifts.
According to insurer Aviva, 46% of British adults say they have received a pre-inheritance, through which benefactors pass on some of their estate to beneficiaries before death, compared to just 37% receiving inheritance in traditional ways.
55% of both inheritances and pre-inheritances are given without any major restrictions, however, benefactors are increasingly determining how their gifts are put to use, with 33% suggesting their money ought to be spent on things such as property, 7%, or education, 2%.
Under inheritance law, if a benefactor lives for seven years after giving a pre-inheritance, up to £3,000, the gift will generally be exempt from inheritance tax and small gifts of up to £250 can be given to an unlimited number of beneficiaries tax free.
With the inheritance tax threshold frozen at £325,000 following the recent budget announcement, any gifts given to a UK charity, either as a pre-inheritance or traditional inheritance, are also tax-free.
“The pre-inheritance is a fairly new initiative,” said Aviva Director, Clive Bolton. “Alongside the obvious benefits of cutting the amount of money liable for inheritance tax, it also seems many benefactors like to see their money being enjoyed whilst they are still alive.”
“It also allows benefactors if they wish, to have some input into how the money is spent.”
But, as a pensions crisis continues to escalate, only 17% of over 55s are currently planning on leaving a pre-inheritance to their loved ones, with one in five saying they don't have enough money to pass an inheritance early, and 21% saying they need to keep hold of the money to be financially secure for the future.
Regardless, the growing popularity of pre-inheritance seems undying and benefactors are now encouraged to adopt more financial planning when dividing their estates.
“We would encourage anyone in this position to consider all their assets - including pensions, investments and property - so they can really enjoy their golden years and potentially help their loved ones,” added Mr Bolton.