Simon Blowey

Advertisement feature: Gift of education or gift to the nation?

Simon Blowey, Financial Planner – Brewin Dolphin

Simon Blowey, Financial Planner – Brewin Dolphin

It’s quite typical to begin a financial article with the well-worn quotation attributed to Benjamin Franklin that nothing in life is certain apart from death and taxes. However, as well as being a little trite and over-used, the sentiment is actually incorrect, despite its continued use by financial panjandrums. There is no greater example than inheritance tax (IHT).

In many cases, the tax saved upon the estate could fund from prep school to university, one or several educations, and as such the view of IHT is far more divisive as the levy of death duties appears iniquitous. Others support IHT to redistribute wealth or simply to raise taxes for the Exchequer, preferring the nation to receive their wealth rather than their heirs. One only needs to look at the deaths column to see how much of a taxable estate the deceased has left, with the implication that against contrary belief they had either been a pauper, or successful in effectively shielding their assets from IHT.

So for those of UK domicile wanting to take some action to redirect their wealth to people of their choosing, as opposed to adding to the government kitty, what options remain? Broadly, if you intend to see out your days in the UK, and wish to avoid higher risk ‘death bed’ planning or insuring the liability (not always a bad option), then spending it, gifting it, or holding it in exempt assets remain the main strategies.

If the taxable estate is valued over the Nil Rate Band (NRB) £325,000 (or up to £650,000 for a transferable NRB or even up to £975,000 for a widow/er and transferable NRB!), then the usual small gifts and those from surplus income should all be exempt. But the main ideas typically involve large capital gifting and exempt assets.

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