Families risking IHT headache by not keeping record of gifts, Canada Life warns

More than half of over-55s (54 per cent) who have given a financial gift in the last seven years have not kept any record of it, a new study by Canada Life has indicated.

According to the findings, just 13 per cent of over-55s said they had kept a record of their generosity in a secure, backed up place –such as a spreadsheet, accounting software or secure notes app – while another 15 per cent said they had written down how much they had gifted in an informal place, such as a paper notepad.

Canada Life, which based the research on a sample of 2,000 UK adults, warned that without clear, accurate records of these gifts, executors may struggle to complete the forms correctly, which can cause delays in probate or increase the risk of queries from HMRC – adding unnecessary stress at an already difficult time.

Upon death, HMRC requires executors to complete inheritance tax (IHT) forms to report the full value of an estate, and to disclose lifetime gifts such as cash, property or shares, made in the seven years before death, and in some cases earlier.

“Gifting to loved ones can be hugely positive,” tax, trusts and estate planning expert at Canada Life, Liz Hardie, said. “Not only can it help reduce an IHT liability, but it can also help loved ones onto the property ladder, support grandchildren through education, or simply make life a bit easier for friends and family.

“However, if you do not keep a clear record of what you have given and when, you risk creating problems for your family later on. Poor records can mean your executors struggle to complete the paperwork once you pass away, and allowances and exemptions may be missed because they cannot be evidenced to HMRC. This can delay the grant of probate and therefore delay payments to beneficiaries.”

Canada Life’s study also revealed that just 31 per cent of over-55s who have given a financial gift in the last seven years knew the exact amount they have gifted. The research found that 45 per cent could give a rough estimate, but that 24 per cent of over-55s had no idea.

By not realising these items count as financial gifts, Canada Life warned that individuals may be giving away significant assets without understanding the potential tax consequences for their estate and their families.

“In the worst cases, if the will has not been drafted in the right way, these delays can leave a surviving spouse or civil partner without timely access to the funds they were expecting to live on,” added Hardie.

“IHT can be a complex area, and seeking financial advice is essential to help you review your financial planning strategy and avoid any added stress for your loved ones later down the line.”

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