Friday, 23 December 2011

Inheritance tax on lifetime gifts that become taxable on death

Inheritance tax works on the cumulation principle. Hence, any lifetime gifts made by the deceased to individuals in the 7 years prior to death will become chargeable to inheritance tax on the donor's death. The amount of tax to be paid on those gifts (by the donees) will depend on the value of other lifetime gifts to certain trusts (as well as on the value of gifts to individuals that become chargeable on death) in the last 7 years prior to the chargeable gift on death.

Lesson: make lifetime gifts first to the persons you love the most and leave the others for later!

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