The right path

Stephanie Parker and Robert Pullen consider the challenges presented by clients wishing to reduce their IHT exposure by making gifts 

Making gifts is a simple way to reduce a taxable estate and mitigate an otherwise inevitable inheritance tax bill. Although the major changes to the tax treatment of trusts in Finance Act 2006 curtailed trust-based planning to a certain extent, there are still situations when gifting via a trust could be a viable option.

The most appropriate gifting strategy for an individual will depend on a number of factors. The type of asset, the value, the recipient’s situation and the donor’s health will all need to be considered and should influence the form the gift takes if potential tax exposures are to be minimised. Considered below is a particular situation which could be approached in a number of ways with differing results.