IHT and gifts

conned_2

Can anyone advise me- I am the executor of a relative’s estate, with a sister who was pretty alienated from my relative and is left much less than me in the will, which she hasn’t yet seen. My relative made lots of gifts up to six years before he died, to various relatives. I had some involvement in his financial affairs but am not aware of everything he did- do I need to research and declare every single item to the solicitors who are doing the probate for me?- their job is pretty straightforward as his affairs were in order before his death. What happens if I miss something or something turns up years or months later to change the tax position. My sister is hassling me to cover up some of the gifts made to her- what are the risks I would be taking? And if she decides to contest the will, what happens if anything has been covered up in the probate process?
Are the gifts included in the estate for purposes of inheritance tax? I know about the sliding tax relief on gifts but some info suggests they are included for IHT as well.
And who pays the tax on gifts- is it the estate of the donor, or the person who receives the gift as well or instead?

lincroft1710

As you have solicitors involved, you should be asking them these questions, with the exception of "what are the risks I would be taking?", since the answer to that one is "don't cover anything up in the first place."

dunstonh

do I need to research and declare every single item to the solicitors who are doing the probate for me?-

Yes. Some gifts may have required notification to HMRC in the tax year of the gift. Others would have just required a record of gift. Evidence is key.

What happens if I miss something or something turns up years or months later to change the tax position.

If you underpay there could be a fine and a request for payment.

My sister is hassling me to cover up some of the gifts made to her- what are the risks I would be taking?

That would be fraud against HMRC. So heavy fines, criminal record and imprisonment are possible outcomes there.

And if she decides to contest the will, what happens if anything has been covered up in the probate process?

It comes to light and you would be in trouble.

Are the gifts included in the estate for purposes of inheritance tax?

Depends if the gifts qualified to be exempt or not. This will depend on when they were gifted, what type of gift it was (from income or capital for example) and the amounts.

And who pays the tax on gifts- is it the estate of the donor, or the person who receives the gift as well or instead?

The executor of the estate.

Basically as it stands the exectutor of the estate has the liability and responsibility. Thats you. Whatever your sister says, she isnt the one who would get in trouble. You would be.

Is the estate a size that you can find manageable or are you getting out of your league?
If you are getting pressure you feel puts you in an awkward position then consider paying for a professsional executor service. Yes its a cost but it removes your liability and means an impartial individual is handling the estate.

CLAPTON

your solicitor can answer most of your question

and do remember that you have to swear on oath (in person and to a real person) that the information you give is true.

John_Pierpoint

As an ordinary bloke who is currently in your situation for the 4th time, I can be a bit more sympathetic as I am currently sorting out a will with similar relatives wanting simple answers to a complex situation.

The first and foremost question is WHAT IS THE ESTATE WORTH - in these days of over priced houses it can be more than you would think.
If the answer to that question is in the 300K plus region then the tax man is going to get interested and you will be responsible for the answers to a big tax form called IHT400 and its subsidiary forms.
(I have recently filled in one and find I have completed 63 sides of A4).
As you have a solicitor doing this job for you it is not surprising that the job can cost thousands and takes months, even if the solicitor is on top of the job and knows what he is doing.

If there is obviously no Inheritance Tax (IHT) to pay the procedure is smaller and simpler and obviously much cheaper.

If you expect the estate to be liable for IHT, you can have a look at the tax man's web site and try to get your head round the situation. The library will have a collection of books on the subject, the Which ones aree well written BUT make sure they are up to date with the autumn 2007 changes.
AFTER you have done this, you will be able to have an intelligent discussion with your solicitor, who will be charging you perhaps 2 pounds a minute.

John

PS Don't forget you are also responsible for the deceased's and the estate's income tax returns in the mean time.
It sounds as if you are lucky enough to to be sorting out the affairs of someone who was still keeping accurate accounts and doing his filing, so you should not find it too hard to keep up to date and prevent the chaos snowballing..

Mojisola

conned wrote: »

My relative made lots of gifts up to six years before he died, to various relatives. I had some involvement in his financial affairs but am not aware of everything he did- do I need to research and declare every single item to the solicitors who are doing the probate for me?

I've never been in this position but, as the executor of several wills of older family members, will be doing it at some point. Is it just a case of going back through the bank statements and seeing what cheques were paid out or do you have to ask people whether they were ever given cash or goods?

dzug1

Mojisola wrote: »

I've never been in this position but, as the executor of several wills of older family members, will be doing it at some point. Is it just a case of going back through the bank statements and seeing what cheques were paid out or do you have to ask people whether they were ever given cash or goods?

You'd be wise to do both.

John_Pierpoint

There are annual allowances that should cover most "normal" gifts.
I would look back through their accounts (if available!) and concentrate initially on any payments over (say) 5K.
You would be interested in what ever they were about even if not attempts to dodge the tax man.

Mojisola

John_Pierpoint wrote: »

There are annual allowances that should cover most "normal" gifts.
I would look back through their accounts (if available!) and concentrate initially on any payments over (say) 5K.
You would be interested in what ever they were about even if not attempts to dodge the tax man.

I don't think any of them have had enough money to give away amounts like that so it will probably be straightforward to deal with.

dzug1

Remember that if the whole estate plus gifts is under the IHT threshold then it's pretty much irrelevant what those gifts were.

conned_2

More very helpful advice-I have accurate records for the banks and investments now but few statements going back seven years. it looks as tho my relative started giving about six years ago- several smaller gifts that are a bit hard to track down because in some cases they were paid directly to people from overseas bank accounts or investments. Also I don’t relish having to back to some of these people to ask how much they were given- it would cause problems. I think I have tracked down the biggest gifts- all added together with the value of the estate they come to just over the IHT threshold, but there is tapered relief on some of them and some of them were in trust, which also makes it very hard to know how much IHT will be due- do I just leave the taxman to work this out or try to calculate it myself to check it is right- how accurate are their calculations, especially with sliding reliefs and trusts etc?