Being given a gift is not always for the best…
We have all been in the position in life where we could do with a little extra cash, and wouldn’t it be nice if you were lucky enough to receive it? Not necessarily. We sat down with Simple Will Director, Phil Izzard who told us all about why being given a gift can actually be a curse.
“Let’s say you were gifted £500,000 by your wealthy great aunt and you spend the money happily on everything you ever wanted but 2 years later your great aunt suddenly dies. Because her estate totals more than £325,000, inheritance tax will be due and because it was less than 7 years ago that you received your gift this is considered part of your great aunt’s estate.
This means that you will be hit with a tax bill of 40% of anything about the £325,000 threshold (approximately £70,000 in this case) regardless if you have spent it all or not.
There is some light at the end of the tunnel though and it’s called ‘taper relief’ which states that if the death occurs between 3 and 7 years after the gift was given then the tax that you are liable to pay is reduced on a sliding scale but this can still be a large amount of money to find”.
So, if you’re ever offered that dream gift then think twice about whether you receive it or not.
There are certain exemptions to the above rule and we will be happy to talk to you about them or any other questions you may have about making your will. Just give us a call on 0800 3800098 and one of the team will be happy to help.