Under the ‘normal expenditure out of income’ exemption for example, gifts can fall outside of the benefactor’s estate if it:
- is part of their normal expenditure;
- was made out of their income; and
- does not reduce their own standard of living.
Another allowance is the annual exemption; up to £2,880 net can be paid where the recipient has no earnings, and such a contribution is within the annual exempt £3,000 gifting allowance for IHT purposes, says Jon Greer, head of retirement policy at Quilter.
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“Third-party contributions also can be a good way of providing long-term financial stability for future generations whether they be children or grandchildren,” he adds. “Starting pension funding early will make it much easier for the next generation to build meaningful pension savings.”
Chloe Cheung is a senior features writer at FTAdviser
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