Legal News | 7.10.17
Why Brucie Played His Cards Right
Following the death of Sir Bruce Forsyth this summer, various tabloids and websites went into overdrive, penning not only nostalgic stories on his life and decades-spanning career, but also articles appearing to question the correctness of his tax planning technique and tarnish his hitherto ‘squeaky-clean’ image.
According to the press the Strictly Come Dancing presenter left his entire fortune (quoted at amounting to the sum of £17m) to his wife, Wilnelia, in a bid to avoid any liability to Inheritance Tax. The articles then went on to claim that Lady Forsyth could now make large gifts to her deceased husband’s relatives, again without incurring an Inheritance Tax bill.
While it is correct that Sir Bruce’s decision to leave his entire estate to his surviving wife would mean that no Inheritance Tax was due in relation to his estate (because gifts of whatever nature and value to surviving spouses are exempt from Inheritance Tax thanks to the ‘spouse exemption’), whether his widow could redistribute his wealth within the family without incurring a tax liability is not quite as clear cut as the tabloids might suggest.
It is worth noting that lifetime gifts to individuals other than a spouse will only benefit from an exemption from Inheritance Tax if the donor survives for seven years following its making. Thus, it is entirely possible that Wilnelia has received the entertainer’s whole estate without a penny paid in Inheritance Tax and that she may decide in the future to make various gifts within the family unit. However, it is only if she survives for another seven years that these subsequent gifts will not attract any liability to Inheritance Tax.
In addition, any gifts made by Lady Forsyth to other family members would need to be made of her own volition and be completely unconnected to Sir Bruce’s estate. Should there be any evidence of an agreement prior to Sir Bruce’s death that these gifts would later be made, there is a risk that HMRC would seek to have the value of these gifts taken in account when considering his estate for Inheritance Tax purposes.
In light of the above qualifications, you may feel less suspicious of Sir Bruce’s intentions regarding his estate and more satisfied that this is not tax avoidance, but merely making good use of the current rules as any individual can do.
Whatever your view, the route Sir Bruce Forsyth chose for his wealth is a good example of how utilising the current UK Inheritance Tax exemptions and allowances can make savings and highlights the importance of seeking sound advice on the matter.