A family member has been making equal gifts from surplus income to her four nieces and nephews since she retired, and I believe these will not incur inheritance tax (IHT).
However, her health has recently taken a turn for the worse and she needs full-time nursing care. As a result, her expenses have significantly increased because her care home is expensive and she has no local authority support.
We wondered if her change in circumstances affects the gifts out of surplus income. Can she continue to make them at the same rate as she has been, based on her 'normal' retirement experience? Or to retain the exemption from IHT, does she have to rebase them to be lower because of her sharp increase in expenditure?
AG, via email
Ian Dyall, head of estate planning at Evelyn Partners, says:
If you make an outright gift of money or assets to someone other than your spouse or civil partner, generally you need to live for seven years after making that gift before it reduces your inheritance tax liability. The exception is where that gift is covered by one of the inheritance tax exemptions, in which case it will immediately reduce your liability.