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Grandparents should consider gift plans

By making gifts to their family via gift plans, grandparents can place any growth on the investment outside their estates immediately. A full IHT saving on the investment is made once the donor survives the gift by seven years.

Gift plans could also give the flexibility to make one-off or regular investments from income. A discounted gift plan could allow grandparents to make fixed withdrawals, with access to the investment passed to the beneficiaries once the grandparents have passed away.

Julie Hutchison, estate planning specialist at Standard Life Assurance, said, ‘It is not always possible for grandparents to pass on capital during their lifetimes as they rely on the income generated from their investments to maintain a reasonable standard of living. This means that it is not until the death of the grandparents that the money is gifted to the grandchildren, by which time it may have been substantially reduced by IHT – not a desirable result for most people.’

Further explaining the benefits of discounted gift plans, she added, ‘During the grandparents’ lifetime, the capital cannot be paid out to the grandchildren. However, because of the potential IHT savings, the ultimate fund available to them may well be greater. Additionally, due to the offshore investment contract used, it may be possible that any gains achieved on the investment are only subject to income tax at ten per cent or 20 per cent, or even not taxed at all.’

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