HM Revenue & Customs (HMRC) will be putting extra scrutiny on lifetime gifts, Standard Life warns.
The insurer says HMRC’s latest IHT & Trusts newsletter contains an item about investigations arising on death, in regard to lifetime gifts.
Standard Life says until 31 March 2008, further examinations will take place in this area.
The D3 form, used to report lifetime gifts, is submitted by executors of the deceased along with the main paperwork.
Within seven years of death, lifetime gifts such as Potentially Exempt Transfers (PETs) and Chargeable Transfers (CTs) are required to be reported.
"Executors will have to pay particular attention to the checks made about lifetime gifts,” Standard Life estate planning specialist Julie Hutchison says.
“The ideal situation is for a person to have kept a note of any gifts made and stored this information with their will.”
She says Standard Life’s recently launched ‘gift record’, part of its estate planning solutions pack, can help in this area of record-keeping.
“This can be used by individuals and their advisers to record lifetime gifts and can be stored safely for future reference," Hutchison adds.
Standard Life says the HMRC newsletter hints at what gifts it is particularly on the lookout for, including ‘forgiven loans’.
In theory, a loan is an asset of the estate at date of death. If a loan is cancelled, or ‘forgiven’, that is normally a lifetime gift for Inheritance Tax (IHT) and the seven year clock starts before it falls out of account.
In research from Standard Life Bank, 57% of parents had helped their children onto the property ladder as first time buyers with either a gift or a loan.
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