Families have been warned to take note of the rules around inheritance tax – including when they will and won't be charged
Financial experts have warned families to be aware of a little-known government tax scheme that could see them lumbered with a bill for receiving financial gifts from loved ones. Families could be hit by an unknown charge if a family member gifts them money but then dies within seven years of doing so. If a grandparent gives money to their grandchildren, for example.It's all to do with inheritance tax – a tax on someone's estate after they die.
This means that if the family member who gives the cash to their loved one survives for seven years after doing so, the money becomes exempt from inheritance tax and the recipient won't be liable for any tax at all. For example, if someone dies between three and seven years after making a gift to a loved one, there's a sliding scale of what you may have to pay back.
What else can I do? Another option to consider, the expert added, is a Junior ISA, which has an annual limit of £9,000 tax free. You could also make regular payments to a savings account for a child under 18 as long as this comes from your regular monthly income. He said that it's vital that someone makes a will for inheritance tax planning, which will allow individuals to decide how to distribute their assets and potentially reduce the tax paid on their estate upon death.In his latest Money Saving Expert newsletter, Martin explained:
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