Many responded to post on multi-generational inheritance tax planning in which I illustrated how a disabled person could shield her pension lump sum from all sorts of hangers-on, especially her local council. You asked in what other common situations denouncing one’s entitlement could be beneficial.

If you are fortunate enough to inherit or get any manner of lump sum, your first instinct might be collecting the cheque and hotfooting it to the bank. Yielding to that instinct would expose your family to the rough attentions of such folks as HMRC.

If, somehow, you didn’t pay ghastly taxes, direct and indirect, to receive the money, your heirs would, with the certainty of mushrooms following rain, pay inheritance tax on the money.

Inheritance Planning, it’s Multi-Generational

You could, of course, blow the lot at once. Guess what? Even that wouldn’t solve the problem – it would merely rob your kin of the opportunity to save inheritance tax down the generations. Inheritance tax planning is a multi-generational affair.

Before you throw your saddle on that gift horse, I beg of you, look it in the mouth. Did you know that you are not bound to accept a gift in a will? You would be said to be declaiming the gift.

Tale of the Two Davids

Remember David Miliband?

His father Ralph died in 1994. Miliband the elder’s will left everything to his wife.

So far, so prosaic. It’s a matter of bafflement that a family of relative wealth and sophistication should have made such pedestrian arrangements. It just goes to show…

The inheritance tax rules of the day would have clobbered the family. The family solved the problem by writing a deed of family arrangement by which the widow did not receive the inheritance—the details are for another day.

Remember David Cameron?

His father Ian died in 2010. Shortly after his death, David’s mother gave the then prime minister a gift of £200,000.
Although the gift might have been prompted by a death in the family, it was for inheritance tax purposes, a potential exempt transfer, if Mrs Cameron lived seven years after the gift there would be no inheritance tax liability on this gift. Again, this is a inelegant way to give a gift, but half a loaf and all that.

Inheritance tax is like an iceberg, most of it is out of sight. Steer the ship of your family’s financial wellbeing away from the ice.

Before you take the cheque and run, your first thought should be ‘How do I save my family, several generations down the line, the burden of paying 40% tax on this gift for generations yet unborn?’

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