• You can give your loved ones money at any time. The main thing to understand is how that gift is taxed. 
• Most bigger gifts only become completely free from Inheritance Tax once you’ve lived for seven years, though everyone gets an allowance of £3,000 a year that is tax-free straight away.
• If a gift ends up creating an Inheritance Tax bill the estate can’t easily cover, Provira’s Estate Advance can help executors pay it.

An early inheritance is money or property that you give to your children, grandchildren or other loved ones while you’re still alive, rather than leaving it all in your will. 

It can be a generous way to help with a house deposit, university fees or ease some financial pressure, and it’s completely legal in the UK. The part most people get stuck on is the tax rules.

There’s also another question we regularly hear people ask: can you get hold of money you’re already owed from an inheritance whilst probate is still ongoing? 

Provira exists to help with both sides of this. Our Estate Advance gives executors access to up to 50% of the net value of an estate, often within days, to cover a tax bill or other estate costs. 

Our Inheritance Advance gives beneficiaries access to part of their inheritance early, without having to wait for probate to finish.

If you’re interested in exploring either of these options, get in touch with the team today.

What is an early inheritance?

An early inheritance, sometimes called a living inheritance, is a gift you make during your lifetime instead of leaving it to be passed on after you die.

People choose to do this for all sorts of reasons. A parent might want to help their child onto the property ladder, or a grandparent might want to see a grandchild through university. 

Because gifts made early enough can fall outside of your estate for Inheritance Tax purposes, giving early can work out more tax-efficient than waiting.

Can you give your children their inheritance early?

Yes, you can. There’s no law stopping you from giving your money or assets away while you’re alive, but it helps to understand how Inheritance Tax (IHT) might be applied.

Some gifts are tax-free as soon as you make them.

For example, everyone gets an allowance of £3,000 per year, known as your annual exemption. If you didn’t use last year’s allowance, you can carry it forward and give up to £6,000.

On top of this, you can also give small gifts of up to £250 per person, to as many people as you like, as long as they haven’t already had another allowance from you that year.

Wedding or civil partnership gifts also have their own rules, allowing for up to £5,000 for a child, £2,500 to a grandchild, or £1,000 to anyone else.

You can also give regular gifts from your surplus income, provided they don’t affect your own standard of living.

Anything above these allowances is still allowed, but it isn’t automatically tax-free. Whether it ends up counting towards Inheritance Tax depends on how much you give and how long you go on to live, which brings us to the seven-year rule.

Why might you give an inheritance early?

The most common reason is wanting to help while you’re still around to see it. But it also has some tax benefits too.

Giving early means you can help at the point the money might actually be useful, whether that’s towards a first home, university costs or starting a family.

But there is a financial angle too. If your estate is likely to be above the Inheritance Tax threshold, giving some of it away during your lifetime can lower the eventual bill, as long as you live long enough afterwards.

In the UK, this threshold is seven years. 

You canread more about the seven-year rule here.

Should you give inheritance early?

There’s no right answer. It depends on your own finances, your family’s needs and how comfortable you are with the tax rules involved.

Advantages of giving inheritance early 

• You get to see your gift make a difference to the lives of your loved ones.
• It can reduce a future Inheritance Tax bill if you live for long enough afterwards.
• It lets you support your family at the point they need it most, such as with a house deposit or the early years of raising children.

Things to think about before giving an inheritance early

• You need to be confident it won’t affect your own retirement, care costs or financial security.
• Gifts made within seven years of your death could still be counted towards Inheritance Tax.
• If the estate can’t cover the tax on a gift when the time comes, the person who received it could end up being liable instead.

If you’re weighing up giving a big gift to your loved ones, it’s worth speaking to a financial adviser orread more about your options for reducing Inheritance Tax here.

Is early inheritance taxable?

It can be, yes. Whether tax applies depends on the size of the gift, the allowances already covered above, and how long you live after making it.

Gifts above your allowances are known as Potentially Exempt Transfers, or PETs. That means they’re only exempt from Inheritance Tax if you go on to survive for seven years.

The seven-year rule explained

If you live for seven years or more after making a gift, it falls outside your estate for Inheritance Tax purposes. If you die sooner, the gift may still be taken into account when working out the tax owed on your estate.

Say a father gives his daughter £200,000 towards a house and then lives for another eight years. That gift sits outside his estate completely, and no tax is due on it. 

What is taper relief?

Taper relief only comes into play where Inheritance Tax is actually due on a gift, and it reduces the rate charged the longer you’ve lived since making it. 

Taper relief is currently:

First, HMRC works out whether the gift is covered by any of your allowances. Only the amount above those allowances is taxed according to taper relief.

What happens if the estate can’t cover the tax on a gift?

If the total value of gifts you made in the seven years before you die stays within the £325,000 nil-rate band (or £650,000 for a married couple or civil partners using both allowances), there may be no Inheritance Tax to pay on them at all.

Where the total goes above that threshold, tax is normally paid from the estate. This is handled by the executors as part of probate, using the estate’s own assets and cash.

But when the estate has an Inheritance Tax bill to pay but the money is stuck in property or other illiquid assets, executors can find themselves stuck. 

Provira’sEstate Advance exists for exactly this situation, giving executors access to up to 50% of the net value of the estate, often within days, without putting their own home, savings or credit history on the line.

If you’re interested in exploring an Estate Advance, get in touch with the team today.

How do you give an early inheritance?

Start by making sure the gift won’t affect your financial security before you make it. After all, retirement, care costs and your own bills all need to come first.

From there, it’s mostly about using your allowances and keeping records of everything.

Then, decide what you’re comfortable giving without affecting your own finances. Use your annual exemption and other allowances where possible.

Always keep written records of what you’ve given, when, and to whom. This makes life much easier for your executors later.

If you want to gift property or shares, it’s worth getting professional advice first to make sure the tax position is clear.

Can you ask for your inheritance early?

You can ask, but there’s no automatic right to receive it. A lifetime gift is entirely up to the person giving it, not something you’re owed in advance.

If you’d like to receive money early, the most useful thing you can do is have an honest conversation with the person involved. 

Explain what the money would be for and be clear that you understand it’s their decision, not a guarantee. If they do agree, the tax rules covered earlier in this guide, including the allowances and the seven-year rule, will apply to whatever they give you.

This is a different situation from being legally entitled to an inheritance that’s held up by probate.

What if your inheritance is tied up in probate?

If someone has died and you’re due to inherit a sum of money, but probate is taking months, then the position is slightly different. 

After someone dies, the estate needs to be valued and administered, with debts and taxes paid before money can be distributed to beneficiaries. That process can take months, and more complicated estates can take a lot longer.

If you are in a position where you need your inheritance before probate finishes, Provira’sInheritance Advance gives beneficiaries access to up to 50% of their future inheritance within days.

There are no monthly repayments, no personal guarantees and no credit checks. The application is assessed against your inheritance rather than your income or credit history. 

The advance is simply paid back once your inheritance is released by the estate, with no early repayment fees and simple interest rather than compound interest.

You canread our full guide to how Inheritance Advances work, orget in touch with the team to talk through your situation.

How Provira can help

Whichever situation applies to you, Provira can help.

OurEstate Advance gives executors access to up to 50% of the net value of an estate, often within days, to cover an Inheritance Tax bill or other estate costs, without personal guarantees, credit checks or monthly repayments.

OurInheritance Advance gives beneficiaries access to up to 50% of a future inheritance before probate, also within days.

Both are repaid once the estate is settled, with no early repayment fees and simple rather than compound interest.

If you’re interested in either option, our compassionate team can explain the costs and options clearly and help you decide what’s right for you.

Get in touch with the Provira team today to find out how we can help.