The "Which?" Guide to Giving and Inheriting ("Which?" Consumer Guides) [Paperback]

'Could be the wisest investment you will ever make' --This text refers to an out of print or unavailable edition of this title.

'A good starter kit for potential donors ... clear, sensible ...
and helpful.' --This text refers to an out of print or unavailable edition of this title.

'A comprehensive guide for those in generous mood' --This text refers to an out of print or unavailable edition of this title.

When making lifetime gifts, or passing on wealth to your heirs, it's easy to overlook the tax consequences. As a result gifts are too often wrapped in an unnecessary tax bill. Also, following several years of rising house prices, inheritance tax can bite deeply into even modest estates. Yet with forward planning, in many cases a tax bill can be reduced or avoided altogether. This guide explains how to plan your giving and shows you how to use tax rules efficiently to ensure that your gift reaches the right person and is not unnecessarily taxed. It includes handy calculators, numerous examples and sections on popular themes such as giving away your home, making gifts to children and grandchildren, and using trusts.

Jonquil Lowe is a freelance consultant and journalist, and a former head of the Money Group at Consumers' Association. She is author of several other Which? books on personal finance, including The Which? Guide to Planning Your Pension, The Which? Guide to Shares, Be Your Own Financial Adviser and Take Control of Your Pension Action Pack.

Inheritance Tax:
Most people do not pay inheritance tax during their lifetime. Inheritance
tax on your death is a tax bill for your heirs not you. So you do not need
to worry about finding the money yourself to pay an inheritance tax bill.
But you might be worried about inheritance tax if:

You want to leave an inheritance. Many people like to know that, after they
are gone, they are still able to help their family and friends, especially
their children, by leaving them money or other assets. Inheritance tax can
take a big chunk out of what you leave.
Someone could face financial hardship when you die. Anything you leave to
your husband, wife or civil partner is normally exempt from inheritance
tax. But this exemption does not extend to an unmarried partner or other
people who may depend on you financially. For example, a partner, sister,
brother, daughter or son who lives with you might have to sell the home you
have shared in order to pay a tax bill on your death.
You want to set up trusts in your lifetime. Following changes in the 2006
Budget, most types of trust may now trigger inheritance tax bills in your
lifetime. Trusts are not just for people with complicated affairs and a lot
of wealth. They are useful, for example, where you want to make gifts to
children but want to avoid them squandering the money in the exuberance of
youth.
You don't like the idea of giving your wealth to the taxman! Most of us
feel we have struggled to accumulate a little bit of financial security and
don't want to see it going into the coffers of HM Revenue & Customs.

The scope of inheritance tax is, on the face of it, wider than that of CGT
because inheritance tax covers all assets - including money, as well as
houses, land, pictures, furniture and investments. Gifts made in certain
circumstances or between certain people or bodies are free of inheritance
tax. This applies to the following gifts, whether you make them during your
lifetime or as bequests in your will.

Gifts to political parties
A gift to a political party is exempt from inheritance tax, provided the
party has at least two MPs or polled at least 150,000 votes at the most
recent general election.

Gifts between husband and wife or between civil partners
Gifts between husband and wife or between civil partners up to any amount
are tax-free as long as the couple are not divorced (or the partnership
dissolved). Even a husband and wife or civil partners who are separated
benefit from this exemption. If the husband, wife or civil partner
receiving the gift is not `domiciled' in the UK, the exemption is limited
to a total of £55,000.

Gifts to charities and certain other bodies
This exemption from inheritance tax is similar to the equivalent one for
CGT. It covers outright donations and gifts of any amount to UK charities,
national museums and art galleries, universities, local authorities,
government departments and a number of other bodies, including, since 6
April 2002, community amateur sports clubs.

Gifts of national heritage property
The gift of certain property, such as works of art, to a museum, art
gallery, the National Trust or similar body, university, local authority or
government department may be exempt from inheritance tax. The transfer of
such property to the HM Revenue & Customs in lieu of paying inheritance tax
is also exempt.

Eligible property can include pictures, prints, books, manuscripts, works
of art, scientific objects, provided they are `pre-eminent' for their
national, scientific, historic or artistic interest. Buildings and land of
outstanding scenic, historic or scientific interest and items associated
with them are also eligible.

A gift of eligible property to anyone else can be conditionally exempt from
inheritance tax. To qualify, the person receiving the gift must agree
certain conditions with HM Revenue & Customs, including that the gifted
property will stay in the UK, it will be properly maintained and preserved,
and the public will have reasonable access to it.

Housing Associations
Gifts of land to a Registered Housing Association are exempt of inheritance
tax. --This text refers to an alternate Paperback edition.