One of the principals of financial planning is to keep things as
simple as possible. Often that is easier said than done. Often,
trying to plan in the context of unknowns means we have to try to
cover a number of options. Examples include what will future
investment performance be, which country will you live in in the
future, how many children and grandchildren will you have and
indeed, how long will you live?
One piece of planning that is quite straightforward is a piece
of planning for passing wealth onto your children when one lives in
the UK and the other in Spain. As an example let's use the
family called the "Sensibles":
Mr & Mrs Sensible live in the
Child Sam Sensible lives in
Child Una Sensible lives in the
In Spain there is gift tax if money
is given to Sam during Mr & Mrs Sensible's lifetime
In the UK, there is no gift tax
In Spain, the recipient of money from
a Will has to pay Inheritance Tax (IHT)
In the UK, it is the estate of the
person who has died that pays the IHT
Mr & Mrs Sensible wish to do some
UK IHT planning and give money to their children now
The problem for Mr & Mrs Sensible is that if they give money
to their children now, this will lead to Sam in Spain having to pay
Gift Tax now. If they leave their money to Sam in their Will there
are allowances and discounts available which means that he will pay
less tax than in the event of receiving a gift.
The solution is quite straightforward. Mr & Mrs Sensible
should give the total amount of money they wish to give to Una in
the UK now. This will reduce their future liability to UK IHT. To
make sure Sam and Una are treated the same they should then deduct
the amount given to Una from her half in their Will.
Sam pays no gift tax and Una pays no
Sam pays less tax on the death of his
parents because of the discounts available on IHT for
from parents to children
Mr and Mrs Sensible have reduced
their UK IHT bill
What a sensible thing to do.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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