Gifts out of surplus income
Most people will know that they are entitled to give £3,000 in any one year (or £6,000 if they have not made a gift in the previous year) without there being any inheritance tax implications. If you make gifts over this amount and you die within 7 years of making that gift then the value of that gift is added to your estate at death for inheritance tax purposes.
This 7 year rule often deters many elderly or people who have serious illness from making lifetime gifts.
However, there is a further useful (and much underutilised) exemption that allows gifts over and above the value of £3,000 to be made without these gifts forming part of your estate if you die within 7 years of making them…
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