Gifts and Pre-Owned Asset Legislation
Generally if the donor survives a gift by a period of 7 years then it will not be treated as part of the estate. There are reduced rates of tax where the gift is between 4 and 7 years before death. Gifts made before your death to charity may qualify for exemption and be eligible for relief from income tax through for Gift Aid.
If you continue to benefit from a gift
If you make a gift into any type of trust or other gift where you as the donor continue to benefit from the gift – for example, you give away your house but continue to live in it – you will pay 20 per cent on the lifetime transfer and the gift will still count as part of your estate. Such gifts are known as gifts ‘with reservation of benefit’ –
This creates a situation where there are two possible Inheritance Tax charges if you die:
- a charge when you transfer the gift into a trust
- a charge to your estate when you die – because the asset is still considered part of your estate
You won’t ever pay more than 40 per cent Inheritance Tax.