Within a family scenario, there are many situations in which one family member may make a gift to other family members. However, the way in which gifts are funded and made can make a significant difference to the way in which they are treated for inheritance tax purposes.
The introduction of the residence nil rate band (RNRB) opens up the possibility of leaving the family home to successive generations without triggering an inheritance tax charge. It is available for deaths on or after 6 April 2017.
It is possible to make gifts during your lifetime free of Inheritance Tax (IHT), as long as you live for more than seven years after making the gift. Most lifetime transfers are ‘potentially exempt transfers’ (PETs).
As well as the increased flexibility in terms of drawdown arrangements that were introduced in April 2015 there were some important changes to what happens to the undrawn funds on death. These changes mean that your pension fund can be passed to survivors tax efficiently.
A loan trust can be used as a vehicle to save inheritance tax, whilst retaining the ability to access the funds lent to the trust.
The residence nil rate band (RNRB) is an additional nil rate band, which is available where a death occurs on or after 6 April 2017 (or, in the case of married couples and civil partners, the death of the second spouse/civil partner occurs after that date) and the property is left to direct descendants.