Most people know of the common Inheritance Tax (IHT) allowances and loopholes: gifts to a spouse or a charity, giving up to £3,000 per tax year, among others, or living for seven years after larger gifts.

However, there is a little-known IHT loophole that does not have a set limit or post-gift survival requirement, known as ‘Gifts for the Maintenance of Family’.

Any gift that qualifies under this loophole is exempt from IHT. If HMRC decide that the gift was larger than reasonable, the reasonable part is still exempt. The basic exemption covers maintenance of a spouse, civil partner, or a child/stepchild’s education costs until the end of university.

The advanced parts of the loophole are potentially more useful.

Firstly, if a child is not in the care of their parents, the person caring for the child can benefit from the same exemption.

Secondly, the exemption can be extended to parents or parents-in-law, or other relatives, if they are incapable of maintaining themselves due to old age or disability.

The exemption is claimed retrospectively by your Executors, so your estate can qualify for the exemption even if nothing was set down in writing.

Particular types of trust can also qualify for the exemption. There are criteria to meet, and it is vital to have evidence, so this is an area that needs specialist advice. In addition, any large gifts or trusts set up in your lifetime are likely to affect your Will.

If you are likely to be helping a relative with care costs or education costs, or are the Executor of an estate where the deceased had supported family members, why not book an appointment with Stephen to find out more? 

Stephen Sampson is a Partner and Head of the Private Client Department at Monan Gozzett LLP Solicitors, specialising in Wills, Powers of Attorney Estate Planning, Trusts and Probate.

Call our Arundel office on 01903 927055, email info@monangozzett.com, or visit our website www.monangozzett.com, to book an appointment with Stephen or speak to one of his team.