Understanding Lifetime Gifting: A Practical Guide for Families Thinking About Their Estate Plans

Lifetime gifting is becoming increasingly relevant for many families. In the last tax year alone, families across the UK paid £7.6 billion in Inheritance Tax, and the amount of money being given away during life has risen sharply, with over £2.1 billion gifted in a single year. These figures show a clear trend. More people are thinking carefully about how and when to pass wealth on, and how lifetime gifts might fit into their wider estate plans.

As Wills, Trusts and Probate solicitors at Machins, we regularly help clients understand the opportunities and risks that come with gifting. This blog explains the essentials, so you can make confident and informed choices.

Why Gifting is Becoming part of Everyday Estate Planning

Several factors have pushed lifetime gifting into the spotlight. Property values have risen, tax thresholds have remained frozen for many years and families are looking for ways to support younger generations who may be dealing with higher living costs or struggling to get onto the property ladder.

Gifting can be a meaningful way of helping now, while also forming part of long‑term Inheritance Tax and estate planning.

Common Myths We Help Clients Unravel

There is no shortage of myths around gifting. Here are some that come up frequently.

“I can only give away three thousand pounds each year.”
The annual exemption is just one allowance. You can give more, although different rules may apply.

“If I transfer my home to my children, it avoids Inheritance Tax.”
If you continue to live in the property, HMRC may still treat it as part of your estate under the gift with reservation rules.

“Only cash counts as a gift.”
Anything with value can be gifted, including property, shares, artwork and personal items.

“If I give assets away, the council will pay for my care.”
Local authorities can investigate gifts that appear to reduce assets before care assessments, even years later. Understanding the truth behind these myths helps to prevent expensive surprises

Why Many People Choose to make Lifetime Gifts

Clients usually come to us with one of three aims.

Reducing Inheritance Tax
Gifting can reduce the size of your estate for tax purposes. This must be done thoughtfully to work as intended.

Helping family members sooner
Many people find real joy in helping children or grandchildren at a time when financial support is genuinely needed.

Long‑term planning
Although gifting cannot be used simply to avoid care fees, it can still form part of a considered financial plan.

Types of Gifts You Can Make

Exempt gifts

These fall outside your estate straight away and include:

• The annual three thousand pound allowance
• Small gifts up to two hundred and fifty pounds per person
• Wedding and civil partnership gifts
• Regular gifts from surplus income
• Gifts to a spouse or civil partner
• Gifts to charities or political parties

Potentially Exempt Transfers

These are usually larger gifts. They only become fully exempt if you survive for seven years after making them.

What You Can Give Away

You can gift almost any asset. Common examples include money, property, investments or cherished belongings. Gifts of property or large assets may require additional legal documentation to ensure they are completed properly and understood clearly by everyone involved.

Why Keeping Good Records Matters

Good record‑keeping helps your executors and makes things much clearer for HMRC. You should note:

• The date of each gift
• The amount or item given
• Who received it
• Any related paperwork, such as valuations or transfer documents Storing these notes with your Will is a simple but helpful step.

How Gifting Affects Care-Fee Assessments

This is an area where many people seek advice. Local authorities can review gifts if they believe they were made deliberately to reduce assets before care funding is needed.

There is no guaranteed “safe” period after which a gift cannot be questioned. Even older gifts can be looked at if there is evidence the intention was to avoid care costs. For this reason, it is important to take advice before making significant gifts, particularly later in life.

Gifts and Powers of Attorney

If you lose mental capacity, your attorneys are limited in what gifts they can make on your behalf. They can usually only give small, customary gifts on birthdays or special occasions, and only if this reflects your usual behaviour. Larger gifts require approval from the Court of Protection.

We often support families in understanding these rules, as many people are not aware of how restrictive they are.

Risks to Think About Before You Gift

Every gift has the potential to affect your future financial security. Things to consider include:

• Whether you may need the asset later
• The seven year rule for Inheritance Tax
• The risk of beneficiaries divorcing or passing away
• The possibility of family disagreements
• How gifts may impact your ability to pay for future care

This is why personalised advice is so important. Gifting can be incredibly positive, but it needs to be approached with care.

Why Professional Advice makes a Difference

Lifetime gifting works best when it forms part of a wider estate plan. As solicitors, we look at your full circumstances, including tax, care planning and your own future needs. We help ensure gifts are legally effective, properly documented and aligned with your long‑term intentions.

If you are considering making a lifetime gift or would like tailored advice on how gifting fits into your wider estate planning, our Wills, Trusts and Probate team at Machins is here to help. You can also read more about how gifting works and the options available to you on our dedicated Inheritance Tax and Gifting page.

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