Nearly half of high-net-worth individuals (HNWIs) have no written record of the financial gifts they make to loved ones, according to research from Charles Stanley, part of Raymond James Wealth Management.
The findings revealed that 45% of wealthy individuals lack formal documentation of gifts, despite gifting being a common strategy to mitigate Inheritance Tax (IHT).
The research revealed that 29% rely on mental notes to track what they have given or intend to give, while 17% have no record at all.
Although gifting remains a popular method of passing wealth to family and friends, failure to keep detailed written records may leave beneficiaries exposed to unexpected IHT liabilities, particularly for gifts made in the seven years before death.
Just under half of respondents report keeping an accurate written list of their gifts.
This supports executors, who must report financial gifts using the IHT400 form.
The study found that 97% of respondents have made or plan to make financial gifts, ranging from travel contributions to support for business ventures or property deposits.
For those who gifted money in the past year, the average amount was £8,367 – significantly above the annual £3,000 gifting allowance.
If an individual were to die within seven years of making such gifts, the excess could be subject to Inheritance Tax.
Baby Boomers reported gifting an average of £11,756 in the last year, while Generation X gifted an average of £6,795.
Harry Bell, director of financial planning at Charles Stanley, said: “Making financial gifts is one of the best ways to offset IHT, and is seeing a growth in popularity as a way to transfer wealth from generation to generation.
“With IHT thresholds also remaining frozen and private pensions set to be included in estate valuation from 2027, gifting will only become more popular as a tool for families to pass their wealth on.
“However our research shows that there is a concerning lack of understanding around gifting and the potential unintended consequences if not done appropriately.”
Bell added: “Making gifts by the book is what really matters. While many claim to keep a record of what gifts have been made, it’s only those with written records that HMRC can track.
“Any other gifts made without justification will be liable to IHT if the estate threshold exceeds £325,000.
“Seeking professional advice is highly advisable when it comes to estate planning. Not only can advisers support clients with achieving their wealth plans, but can help make the most of all tax-efficient vehicles and allowances to simplify estates left behind.”
