Tax evasion going forward: securing your inheritance with advance gifts

When planning your inheritance, it is important to understand the potential of advance gifts, particularly in terms of their inheritance tax implications. Advance gifts, i.e. gifts made before the inheritance, can play a decisive role in strategic asset transfer and contribute significantly to minimising the tax burden.

What are advance gifts?

Advance gifts are transfers of assets that take place during the lifetime of the donor. They are often used as a means of asset succession to reduce the assets to be inherited and thus reduce the inheritance tax burden on the heirs.

Inheritance tax relevance of advance gifts

• Use of allowances: Advance gifts allow the use of gift allowances, which can be claimed every ten years. By making targeted use of these allowances, the taxable inheritance can be reduced.
• Ten-year rule: For inheritance tax purposes, all assets gifted within ten years prior to the inheritance are added to the inheritance. This aspect is crucial for planning advance gifts.

Strategies for using advance gifts

Early asset transfer: By transferring assets early, testators can make optimal use of gift tax allowances and thus reduce the inheritance tax burden on their heirs.

Regular gifts: Regular gifts over several years can be an effective way of reducing the assets to be inherited while making multiple use of the allowances.

Legal and practical considerations

Documentation of advance gifts: Careful documentation of all gifts is essential in order to provide the necessary evidence in the event of a tax audit.

Weighing up the financial implications: Careful consideration must be given to how advance gifts affect the donor’s assets and financial security in old age.

Seeking advice: The complex nature of advance gifts and their tax consequences require expert advice in order to develop the best strategy for individual needs.

Conclusion

Advance gifts are a valuable tool in inheritance tax planning. They offer the opportunity to reduce the tax burden on heirs, but require careful planning and consideration of the ten-year attribution period. With a strategic approach and professional advice, the potential of advance gifts can be optimally utilised to meet the financial goals and wishes of the donor.