A child asks for help with a deposit. A grandchild starts school. A parent gets older and the idea of care costs becomes less abstract. Or you reach a point where you start thinking about how what you’ve built could support others sooner rather than later.

There’s no single “best” answer. But there is a strong way to decide — one that protects your future, reduces avoidable tax where appropriate, and keeps relationships steady.

In the UK, lifetime gifts can reduce inheritance tax exposure, but only when you understand the rules and plan deliberately (and when you don’t accidentally trigger the traps that undo the benefit).

Start with the real question: what is this wealth meant to do?

Before you compare “gift now” versus “inherit later”, it helps to name the function of the money. Most people are trying to achieve one or more of these:

• certainty (knowing your own future is covered)
• continuity (helping family stability)
• opportunity (timely support for housing, education, career moves)
• clarity (reducing future confusion and conflict)
• protection (avoiding unplanned outcomes under intestacy rules)

The best plan usually does more than one.

At Finura, we often find many families don’t choose just one route. They choose a blend: structured support while living, and a clear will for what remains.

Why gifting while living can be the smarter move

1) Timing can matter more than size

For many families, a £30k gift now has more impact than a £100k inheritance later.

That isn’t sentiment, it’s how real life works. Housing costs, childcare costs and the “early adulthood squeeze” often arrive long before inheritance does.

The UK has a long-documented pattern of intergenerational transfers shaping outcomes — not just inheritances, but gifts and loans too.

If you want wealth to change someone’s trajectory, timing is usually the lever.

2) The UK gifting rules provide legitimate tax routes

Gifting doesn’t need to be complex. It does need to be precise.

The key point: many lifetime gifts become Potentially Exempt Transfers (PETs) — meaning they’re outside your estate for inheritance tax if you survive seven years after making them.

Alongside PETs, you have exemptions that can apply immediately, including:

• £3,000 annual exemption (and the ability to carry forward one unused year)
• small gifts up to £250 per person (with restrictions)
• wedding and civil partnership gifts (limits depend on relationship)

And then there’s the one people often underestimate:

• Normal expenditure out of income — regular gifting from surplus income that doesn’t affect your standard of living (and can be immediately outside your estate if it meets the conditions)

This is where high-quality planning can be quietly powerful. It’s also where documentation matters most.

3) It can reduce the admin burden later

Executors don’t just distribute assets. They gather information, value the estate, account for gifts, pay tax where due, and deal with probate.

HMRC has a dedicated form for lifetime gifts when someone dies (Schedule IHT403), which gives you a sense of how much detail can be required.

A planned gifting strategy — recorded clearly — can reduce guesswork later.

The emphasis here is on early planning and clarity as part of preparing a will and your affairs.

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Why leaving wealth in your will can be the wiser choice

1) Your security comes first, especially with care costs in the background

None of us can predict the future, and we often see clients faced with challenges they never expected.

The NHS sets out the landscape of social care support and paying for care in England, including self-funding and the reality that many costs fall outside the NHS.

This is also where people get caught out by deprivation of assets concerns. If a local authority believes you gave assets away in order to reduce what you’d have to pay for care, they may treat you as still having those assets in the financial assessment.

That doesn’t mean “don’t gift”. It means: gift with a plan, and keep your own future protected.

2) A will gives control, clarity and contingency planning

A will doesn’t just say “who gets what.”

It answers:

• who makes decisions (executors)
• what happens if a beneficiary dies before you
• how specific assets should be handled
• how quickly things can be settled
• how disputes and ambiguity are avoided

The Law Society’s public guidance gives a clear view of how probate and estate administration works — and why being unprepared can make it harder for everyone involved. If you want certainty and continuity, a will is the foundation, regardless of how much gifting you do during your lifetime.

3) It helps avoid unintended dependency or “silent expectations”

Big lifetime gifts can be beautiful. They can also alter dynamics.

Clients have sometimes told us that they find it creates pressure to repeat the support. Sometimes it becomes a reference point for fairness. Sometimes it shifts power in the relationship without anyone meaning it to.

If you’re uncertain how a large gift would land, leaving wealth later, with a clear explanation of intent, can protect both the relationship and your sense of stability.

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The common traps that undo good intentions

Gifts with reservation: “I gave it away, but I still use it”

This is one of the most expensive misunderstandings in estate planning.

If you gift an asset (often property) but still benefit from it — for example, gifting a home but continuing to live there rent-free — HMRC may treat it as still part of your estate for inheritance tax purposes under the “gift with reservation of benefit” rules. Property gifting needs careful structure and proper advice.

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Regular gifts from income: powerful, but record-heavy

The “normal expenditure out of income” exemption can remove significant value from an estate over time — but only if it meets all conditions, including the requirement that gifts:

• form part of normal expenditure
• are made out of income
• leave enough income to maintain normal living standards.

If you want a clear explainer that translates HMRC language into practical examples, Royal London’s technical note is one of the best readable summaries.

This is where good records protect your executors and reduce HMRC friction later.

A decision framework that holds up under real life

Step 1: Set your “future you” floor

Before you gift anything meaningful, define what you need to keep back for:

• retirement lifestyle
• emergencies
• inflation and rising costs
• care contingencies

Step 2: Choose a gifting style that you can sustain

Most people fit one of these patterns:

Milestone gifting

Support for a deposit, childcare, education, debt clearance.

Annual structured gifting

Using the £3,000 annual exemption consistently, plus small gifts where appropriate

Surplus-income gifting

Regular gifts that may qualify immediately when properly documented.

The best approach is the one you can maintain without strain or regret.

Step 3: Make sure your will reflects what you’ve already done

If you gift significantly while living, your will still needs to tell the story.

Otherwise:

• one person may feel over-supported
• another may feel overlooked
• your executors may be left interpreting intent

MoneyHelper’s will-planning guidance is a solid baseline for how to think about this clearly.

A short letter of wishes can also help translate intent into human language (and reduce misinterpretation).

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Step 4: Explain the “why”

You don’t need to disclose every number.

You do want to reduce ambiguity.

A few principles go a long way:

• “This helps most at this point in your life.”
• “I’m keeping enough back for long-term security.”
• “This keeps things clear and fair across the family, even if not equal.”

Clear conversations often protect relationships. When important topics go unspoken, it leaves room for assumptions to take hold. In our experience, creating space for openness early can make difficult moments far easier to navigate.

Three examples

1) The deposit gift with long-term security protected

A couple in their 60s wants to help their daughter buy a home. They gift a defined amount as a PET, record it, and keep enough in reserve for retirement and contingencies.

What makes this work:

• they understand the seven-year rule and what counts as a PET
• they use annual allowances where appropriate
• they document the gift and keep evidence for executors (HMRC gift reporting context)
• they update the will so the “why” is clear.

2) The blended family where clarity matters more than generosity

A later-life couple wants to ensure the surviving spouse is secure but also wants children from a first marriage to receive a fair share eventually.

Why this is sensitive:

• assumptions build quickly in blended families
• uncertainty after death can turn into conflict
• executors face a heavier admin burden if plans are unclear

3) The high-income “surplus income” plan that quietly reduces IHT over time

A grandparent funds school fees or regular support for grandchildren out of surplus income.

Why it works:

• it may qualify under the normal expenditure out of income exemption if it meets all conditions
• it can be immediately outside the estate when properly evidenced
• it reduces future admin and HMRC disputes if records are clean

Charitable giving can reshape both impact and tax

If leaving a legacy to charity matters to you, it can also change the tax position.

Gifts to charity in your will are generally exempt from inheritance tax.

If you leave at least 10% of your net estate to charity, the inheritance tax rate on the remaining estate can reduce, subject to the rules.

This is where values and efficiency can align naturally.

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Talk to Finura

At Finura, we help you approach gifting and inheritance with steadiness.

We look at:

• your long-term security first
• the rules and record keeping that protect your plan 
• the family dynamics that determine whether decisions land well
• the clarity that makes things easier for everyone later.

FAQs

Is it better to gift money before you die?

It depends on your financial position and priorities. Gifting during your lifetime can create immediate impact and may reduce inheritance tax exposure, but your own long-term security should always come first. Many families take a balanced approach — offering support gradually while keeping a clear estate plan in place.

How does the seven-year rule work?

Many larger lifetime gifts fall outside your estate if you live for seven years after making them. If you die within that period, the gift may still be considered when calculating inheritance tax. Keeping clear records helps ensure your executors can report everything accurately.

What counts as “normal expenditure out of income”?

These are regular gifts made from surplus income that don’t affect your standard of living. To qualify, they must form part of your normal spending pattern and be properly documented. When used consistently, this exemption can reduce the taxable value of an estate over time.

Can I gift my home but keep living in it?

Usually not without consequences. If you continue to benefit from a property after gifting it — for example, by living there rent-free — it may still be treated as part of your estate for inheritance tax purposes. Property transfers should always be considered carefully before proceeding.

Could gifting affect how care fees are assessed?

Potentially. If assets are given away and later you require financial support for care, authorities may review whether those gifts were made to reduce your contribution. Planning from a position of financial strength helps avoid difficult decisions later.

Sources & further reading

• GOV.UK — Gifts and inheritance tax 
• GOV.UK — Work out inheritance tax due on gifts / seven-year rule 
• HMRC IHT Manual — Normal expenditure out of income
• HMRC IHT Manual — Gifts with reservation of benefit
• MoneyHelper — Gifts and exemptions
• MoneyHelper — Planning what to leave in your will
• Age UK — Deprivation of assets
• NHS — Social care and support
• NHS — Paying for your own care
• Law Society — Dealing with someone’s affairs when they die
• ONS — Intergenerational transfers analysis
• HMRC IHT 403 gifts schedule (context for executors)
• Royal London technical — normal expenditure out of income (practical explainer)

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Date written: 5th February 2026

Approved by Evolution Wealth Network Ltd on 18/02/2026.