Grandparents ‘should to consider gifts to reduce IHT’

Elderly people wishing to simultaneously aid their family financially and reduce their inheritance tax (IHT) should consider giving gifts via a trust, it has been suggested.

By making gifts to children through a gift plan trust, any growth on the investment in the fund is immediately outside the estate of the grandparent and a full IHT saving can be made if the grandparent survives the giving of the gift by seven years, according to Standard Life.

Estate Planning Specialist for Standard Life Assurance commented that it is not always feasible for grandparents to pass on capital while they are alive as they need to maintain a reasonable standard of living, thus it is only upon death that money is gifted and as such is subject to IHT.

Currently, IHT at 40 per cent is payable on the value of a deceased person’s estate that exceeds £300,000.

Prime minister Gordon Brown announced plans to increase the IHT threshold to £350,000 by 2010 in his last Budget as chancellor of the exchequer.