Assets that are given away by their owner before death may not form part of that person’s death estate on death and may therefore not attract inheritance tax.

The term “potentially exempt” refers to the fact that at the time of making the gift, the donor won’t know how long they will subsequently live. If they survive at least 7 years then the gift if fully exempt. However if they survive for less than that then inheritance tax can be levied on the recipient.

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