IHT planning ahead.....

kate2510

My 18 year old son will complete a training course this July. He would like to undertake an unrelated course of study for which we may well have to pay. I will inherit some money this year so we will be able to afford this and to make him a small allowance while he studies. As I am 63 I am wondering if this would be regarded as a potentially exempt transfer if I did not survive a further seven years from the transactions. Would I be better advised to pay the fees and allowance as thay became due or give him a lump sum at the start of the course to cover the costs? Is it at all possible that HMR&C would regard this as normal parenting expenses and not a gift?

taliesin

A real expert will surely be along soon, but in the meantime, a couple of ideas to consider:

If you are planning to give part of a forthcoming inheritance to your son, you might consider asking the person concerned to change his or her will. If that person has already died, you could ask the executor to arrange a "deed of variation" of the will so that all or part of your legacy goes straight to your son. Either way, if you do that, IHT in respect of your own estate will not arise, at least as far as that money is concerned.

If you pay the fees and an allowance out of your own income as part of your regular expenditure, these would surely count as "gifts paid from income" which are disregarded for IHT. Perhaps this is what you meant by "normal parenting expenses"?

More information at http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/InheritanceTaxEstatesAndTrusts/DG_10010612