Lessons & loopholes from multi-generational gifting

Since the 2024 Autumn Budget, we’ve seen double the number of enquiries around clients gifting assets before their death to avoid increased inheritance tax (IHT). With pension IHT changes not coming into force until April 2027, we expect this to increase rapidly over the next few years.

While 2027 may feel a long while away, sooner is better when it comes to financial, retirement and estate planning.

Here, Duncan Bailey explores why these evolving tax rules are prompting more people to spend and share their wealth during their lifetime.

Spending while living

Though many people consider property, businesses, savings and investments as key contributing items to their net worth, pensions are often an overlooked asset that should be considered in financial disclosures and personal legal documentation when planning for your future and those close to you.

While there once was a massive disincentive to spend the money from pensions because of the IHT treatment on death, the changes from April 2027 have completely upended this.

From our experience, we’ve seen a lot of clients talking about taking their 25% tax free lump sums from their pensions. Many have talked about gifting this sum, while others consider using this to supplement their current lifestyle.

That means we’ll see people spending more while living and looking to enjoy the fruits of their hard savings, whether that’s going on holiday or pursuing a passion that they’ve always had.

Lesson: Regardless of your stance on gifting and when to do so, make sure you have enough for yourself to enjoy life.

Gifting to loved ones

Understandably, many clients aim to pass on as much wealth as possible to their loved ones — and when there’s political change, people tend to opt for a ‘giving while living’ strategy that they’ll have more control over.

This includes taking advantage of lifetime allowances via direct gifts or setting up trusts to manage and protect your wealth for future generations.

Another common move is for people to gift their family homes to their child/children while they’re still living as a way to reduce their IHT bill. However, it’s important to consider the legal implications of doing so. For instance, gifting a home while still residing in the residence could result in a shock IHT bill if the correct legal requirements — like charging children market rental rates — aren’t covered.

It’s also becoming more common to see grandparents paying school fees or parents giving lump sums to their adult children. While we’re seeing an increase in generosity from grandparents, it’s important to consult an experienced legal and financial advisor to ensure that you’re not leaving yourself short of money.

Additionally, from a more personal standpoint, clients aren’t just wanting to enjoy themselves — they’re looking for ways to treat their loved ones. That might mean purchasing a holiday home and maximising family time or taking three generations of a family abroad for a once in a lifetime trip.

Lesson: Contributing to the comfort and future of your loved ones could have unintended consequences without careful and considered estate planning.

Gifting businesses

While lifetime gifting has always been an essential element of estate planning, recent tax changes has meant that business owners are paying extra attention to how to reduce IHT liabilities when passing down their business. In fact, we’ve seen a huge increase in business owners looking to gift the business ahead of April 2026.

We have a number of clients in their 60s and 70s with family businesses who are currently looking to gift these because of IHT changes and are exploring the option of using a trust as the holding vehicle rather than passing the business directly to the child/children.

This approach offers more protection for the business and the child/children in case of a future marital breakdown which can lead to financial disputes. As such, it’s becoming a more popular approach following the most recent Budget.

Lesson: There are various avenues to pass down your business to your child/children. However, these structures can be complex and have different requirements, so it’s always worth seeking expert, tailored legal advice.

Charitable gifting

Another indirect way that individuals are increasingly ‘giving’ back to their loved ones is through their philanthropic and charitable efforts. Not only does donating to social causes close to the heart encourage shared personal values across different generations, but there are also positive implications for a person’s estate.

Donations or gifts to charity are not subject to IHT and— where a charity donation is equivalent to at least 10% of your estate — any IHT payable elsewhere is reduced to 36%.

Perhaps partially inspired by these recent changes, we see more clients now settling on an amount (for example, £1m each) that they want the children to receive and giving the remaining balance to charity. While this example is not a widespread occurrence, it’s happening more often.

Lesson: More people are considering the financial, social and personal effects of their gifting strategies when planning for the future, so taking proactive steps to review your estate planning strategy with legal advice — early and regularly — could maximise these benefits overall.

Talk to us

Gifting assets to children, grandchildren and to charitable and social causes are often done with the best of intentions, yet without careful consideration of the legal and financial effects of doing so, recipients could find themselves in a tricky spot.

Through Brabners Personal, our award-winning solicitors can enable your gifted sums and assets to be received in the spirit it was intended — without unnecessary strings or shock bills attached.

If you have questions about our Estate Review service and gifting, talk to us by giving us a call on 0333 004 4488, sending us an email at personal@brabners.com or completing our contact form below.