Sometimes, people may wish to give their children their inheritance before they die, rather than waiting for the inevitable to happen. The Inheritance Act does allow for this in some circumstances. Nobody wants to see the wealth that they have accumulated during their lives going to waste, but assuming that it will go to their children can be a mistake – with inheritance tax and the potential for needing it to be used to pay off creditors, there may be a lot less than you might think, and that can be a big shame.
Which is why it is sometimes a much better idea to give your children’s inheritance to them before you pass away, in the form of a gift. This can work particularly well if your estate would otherwise be worth more than £325,000 (or £650,000 if you take a spouse’s tax free limit) which is the threshold for having to pay inheritance tax. As long as you survive for seven years or more, there will be no tax to pay. If, however, you die within seven years of giving the gift, then it will be counted as part of your estate, and subject to a forty percent inheritance tax rate.
Giving your saved up wealth away earlier than you might otherwise have done is also better for your children. People are living much longer, with the numbers of those over the age of 90 in the UK having tripled since 1980. This means that people are having to wait much longer to receive their inheritance, and often receive it at a time in their lives where they don’t necessarily need it as mortgages are often already paid off and there is not much debt. If they were to receive it younger, in their 30s, perhaps, rather than in their 50s or 60s, it would be much more helpful, enabling more people to get a foot on the housing ladder, for example.
If the inheritance is not given at an earlier stage, then it can simply be added to savings, and this is then passed to their own children, but again, at a time when it is not going to do much good. Money can pass down through generations without ever being put to good use in this way, which is a waste and a shame.
If you are considering giving money away to your children while you are alive rather than leaving it in a will, then it is wise to speak to a financial planner. You don’t want to leave yourself short by giving away too much or not considering your own needs. Will you still want to go on holiday? Treat yourself to meals out? Make sure you can still enjoy your own life too.
The Inheritance (Provision for Family and Dependents) Act 1975 is in place in order to allow specific people to file a claim against a deceased person’s estate. The reason for the claim needs to be that they require financial provision from the estate, and there are certain circumstances that need to be reached in order to be able to do this.
Each claim is taken on a case by case basis, as the circumstances for each individual estate, claim, and situation will be different. However, there are only certain people who can claim under this act. The first of these is the spouse or civil partner of the deceased, and, perhaps surprisingly, this extends to any former spouses or civil partners. They must, however, not have re-married or entered into a further civil partnership. As well as this, there must be no provision within the divorce which means that they cannot make a claim under the Inheritance Act.
Another person who can make a claim is a cohabitee. But, there is a set of requirements that this person must satisfy before they will be able to make a claim. They must have lived with the deceased as husband or wife, and they must have lived with the deceased in that state for at least two years immediately before the death.
The children of the deceased are also able to make a claim. This includes both biological and adopted children. For deaths that occurred after 1st October 2014, this also extends to anyone who was treated as a child by the deceased. This category is sometimes a subject for debate as it allows adult children who have not been financially dependent on the deceased for a long time to file a claim.
Finally, anyone who was a dependant of the deceased. This means someone who was looked after by the deceased, and for whom the deceased was making a substantial financial contribution to.