Should You Be Gifting More During Your Lifetime

For many families, financial planning isn’t just about building wealth - it’s about deciding how and when to pass it on. Increasingly, we’re finding that clients don’t just want to leave an inheritance.

They want to help children and grandchildren when that support can make the biggest difference, whether that’s buying a first home, paying school or university fees, or providing capital to start a business.

Lifetime gifting can be an effective way of achieving those goals, but it’s also one of the most misunderstood areas of financial planning. Here are some of the misconceptions we come across most often.

Misconception 1: “Lifetime gifting is only about reducing inheritance tax.”

While inheritance tax is often part of the conversation, it’s rarely the main reason people choose to make gifts. Many clients simply want to see their family benefit from their wealth during their lifetime. Helping a grandchild through university or giving a child the confidence to buy their first home can have a far greater impact than an inheritance received decades later. For many families, that’s every bit as important as any potential tax saving.

Misconception 2: “The seven-year rule is all I need to know.”

The seven-year rule is well known, but it’s only one part of the inheritance tax rules. Many lifetime gifts are treated as Potentially Exempt Transfers (PETs), meaning they may fall outside your estate for inheritance tax purposes if you survive for seven years after making the gift. However, there are also a number of other exemptions, including the annual gifting exemption, exemptions for certain wedding or civil partnership gifts and, in some circumstances, gifts made from surplus income, provided the relevant conditions are met.

Understanding how these rules work together is often far more valuable than focusing on the seven-year rule alone.

Misconception 3: “Once I’ve given something away, it’s no longer my concern.”

For inheritance tax purposes, a gift generally needs to be exactly that – a genuine gift. For example, if you give away your home but continue living in it without paying an appropriate market rent, HMRC may still treat the property as forming part of your estate. These are known as gifts with reservation of benefit and are one of the most common areas of misunderstanding.

Misconception 4: “I should give away as much as I can.”

Being generous is admirable, but gifting should never come at the expense of your own financial security. People are living longer, retirement can last several decades and future expenditure is rarely predictable. Before making significant gifts, it’s important to consider your own income requirements, potential care costs, inflation and any changes in your personal circumstances. The aim should be to help future generations without creating financial pressure for yourself later in life.

Misconception 5: “Everything has to be divided equally.”

Every family is different. One child may need financial support today, while another may not. One may have already received help with a property purchase or education, while another has taken a different path. Equal and fair don’t always mean the same thing. What’s important is that any gifting forms part of your wider estate planning and reflects your own wishes. In some families, open conversations can also help avoid misunderstandings later on.

Misconception 6: “I don’t need to keep records.”

Keeping a simple record of gifts is often overlooked. Making a note of when gifts were made, how much was given and, where relevant, which inheritance tax exemption may apply can make life much easier for your executors. Good records can also help if HMRC ever needs to review your estate.

A thoughtful approach

Lifetime gifting can be one of the most rewarding aspects of financial planning. It can allow you to support your family when they need it most and, in some circumstances, improve the inheritance tax position of your estate. As with most financial planning decisions, however, there is rarely a onesize-fits-all answer. The best gifting strategies are those that are carefully considered, regularly reviewed and designed to support both your own long-term financial security and the future of the people you care about.