A lifetime gift is any gift made to a person from your estate to help minimise the effect of Inheritance Tax.
These gifts in the form of CLTs may become liable for Inheritance Tax at the time they are given and again, if you should die within seven years of making the gift.
CLTs are lifetime gifts given to a discretionary trust or possession trust over seven years before the date of your death, and will be liable for any Inheritance Tax due at a rate of 20% above the Nil Rate Band under these circumstances.
PETs – that is lifetime gifts made to another individual or to a simple trust, will not attract IHT and could be exempt altogether, if you live on for at least another seven years after the gift is made.
Should you die within seven years after making these gifts, IHT will be charged at a rate of 40%, although any credit and taper relief will be taken into account.