Lifetime planning from an inheritance tax (IHT) perspective is principally associated with lifetime giving. The broad aim is to reduce the value of a person’s estate and consequently the IHT charge on death.
In addition to lifetime giving, the planning might also involve structuring asset ownership to ensure tax efficient investments and enhancing 100% relief from IHT wherever possible (see the BPR and APR guidance notes). Lifetime IHT planning should also involve making best use of all IHT exemptions. See the Exempt transfers and Dispositions that are not transfers of value guidance notes.
Lifetime planning involves, firstly, a thorough fact-find exercise to uncover the full extent of the client’s assets, previous gift-making history and family circumstances. See the Fact finding guidance note.
Secondly, it will be necessary to ascertain the client’s objectives and consider the best way in which these can be met.
Lifetime planning for wealthier clients usually involves a combination of lifetime gifts and planning through a will. The two aspects should not be dealt with in isolation. It is essential to have regard to the terms of a will if lifetime gifts are contemplated and vice versa. Even if a client does not pursue any lifetime planning, he should at least consider making a will. See the Drafting a Will guidance note.
Similarly it is crucial to get the priorities right. Before embarking on any lifetime giving it is essential to have regard to the client’s own needs and financial security. Tax savings should never be at the expense of the wellbeing of the client and his family.
Basic considerations of lifetime planning
Whilst some of the following may be obvious, they are the key questions to address in respect of any lifetime planning exercise.