£5000 cash gift

okciv

Hi, Looking for some help here. Might have posted in the wrong place?

A relative has just given my partner £5000 cash for a 'rainy day' They don't want to have 'too much' money as they are a pensioner & do not want the govermnent getting their hands on the money (their words not mine)

My question is, what does he do with this? If he puts it in the bank, will they ask questions? Will he have to pay any sort of tax on the money?

We were thinking just invest his limit in an ISA? Currently don't have one.
Only debts we have are mortgage/cars which we wouldn't want to pay off as they are 'normal debts' for us.

Any advice appreciated...

CLAPTON

Even in the UK people can give other people gifts of money... it isn't a crime.


There is no tax to pay as such

However, there are potential IHT issues if the relative
-has an estate over the IHT threshold when he/she dies
-and dies within 7 years
-but that will be paid from the estate if appropriate

If the relative's intention is to impose a burden on other tax payers in the event of his/her need for tax payer funded care then they may be some problems


but you haven't said enough about the financial circumstances to be very specific

okciv

From what I understand the person (an uncle) has quite a lot of money aswell as his own property. He has a few private pensions.

He has opened bank accounts for our daughter & put quite a lot of money in them. He's given my partner money before for the same reasons, ie not wanting to have 'too much'. In the past few years I think he has given him £7000 and £5000 on different occassions.

He has family, children/grandchildren that he has not spoken to for a very long time (25ish years) and the only people in his will are my partners & his mother.

I get the impression he want to 'give away' most of his money so that his children have nothing to claim?

Are there any important details I have missed that would help?

okciv

Also, Just say 'something' happens to this relative.
Can anyone prove where his money has gone? If he has taken this out of his bank in cash and roughly the same amount goes into our bank then can anyone link these together?
Is it up to us to prove where this money has come from/not come from?
Is it up to him to provide details of where his money has gone?

Reaper

Thousands of pounds cash being handed over in brown paper bags? You'll not only have IR after you but you'll end up with the money laundering people going through your finances with a fine toothcomb too!

Before resorting to extreme measures make sure the giver is making use of all their allowances. It is all tax free if he lives 7 years after giving the gift and even if not there are additional allowances such as:

* An annual exemption of £3000 that can be given away every year
* £250 to as many different people as you like each year
* If a somebody gets married parents can give a £5000 gift, grandparents £2500 and anybody else £1000

For these and many other exemptions click here

okciv

Reaper wrote: »

Thousands of pounds cash being handed over in brown paper bags? You'll not only have IR after you but you'll end up with the money laundering people going through your finances with a fine toothcomb too!

The previous money were as a moving house gift & went towards our mortgage aswell as half the money for a car that my partner bought. So I'd have thought (naive as this might sound that there is no paper trail for any of these?) How can anyone say where the money has come from? For all they know, it was a lottery win or from selling stuff on ebay or somethig like that?
When I say 'no paper trail' I don't mean we have done anything wrong and are covering it up or anything like that!! I just mean that we got a gift & used it? Am I being naive, I don't feel like we have done anything wrong?

CLAPTON

Facts first
facts second
facts third

how much is his estate worth
is his intend to minimise IHT (legal)
avoid IHT maybe illegal
or avoid any legal issues with his offspring
or both

and how much is he actually giving way each year
how old is he

who is his executor?
they must swear that probate is correct.

Reaper

okciv wrote: »

I'd have thought (naive as this might sound that there is no paper trail for any of these?)

When you say cash I'm not sure whether you really mean cash. If money is transferred by bank transfer or cheque there is a paper trail. What's more the IR can and does demand to see bank records if they think there is avoidance going on. e.g. lot's of money vanishing from the estate in the previous couple of years.

This article is 2 years old but describes how (at the time) they were cracking down on it.
http://www.telegraph.co.uk/news/uknews/1563730/Crackdown-on-7-year-inheritance-tax-gift-rule.html

While I'm happy to assist you minimise your tax liabilities advising you on how to evade them is not something we are allowed to do even if we wanted to.

okciv

CLAPTON wrote: »

Facts first
facts second
facts third

how much is his estate worth
is his intend to minimise IHT (legal)
avoid IHT maybe illegal
or avoid any legal issues with his offspring
or both

and how much is he actually giving way each year
how old is he

who is his executor?
they must swear that probate is correct.

My answers here probably won't help:

how much is his estate worth - Noone will know that apart from him. We don't think it would be hundreds of thousands. (not IHT levels in our opinions)

is his intend to minimise IHT (legal)
avoid IHT maybe illegal
or avoid any legal issues with his offspring
or both

We doubt he has IHT levels of an estate so nothing illegal going on here!!

I have always got the impression that he wants to stop his children from claiming any of his money but that is just my opinion (& who would blame him, hes never spoken to them for 25 years & never met his grandchildren.)

and how much is he actually giving way each year

Again here we don't have any idea, he will be the only person who knows this.
He opened a trust fund for our daughter than none of us have access to so no one apart from him knows how much is in there.
He gave my partner £5k about 3 years ago (for our new house - we also got roughly the same amount from my parents) & then last year gave him around £7k (for a new car)
These were actual cash gifts. He took the money out of the bank in notes and gave them to my partner.
The £5k he got today was in notes. There is never any conversation about this. My partner very rarely sees his uncle, he just out of the blue handed over an envelope with £5k in it?

how old is he 80

who is his executor?
they must swear that probate is correct.
My partners mother - his sister in law

okciv

Reaper wrote: »

When you say cash I'm not sure whether you really mean cash. If money is transferred by bank transfer or cheque there is a paper trail. What's more the IR can and does demand to see bank records if they think there is avoidance going on. e.g. lot's of money vanishing from the estate in the previous couple of years.

This article is 2 years old but describes how (at the time) they were cracking down on it.
http://www.telegraph.co.uk/news/uknews/1563730/Crackdown-on-7-year-inheritance-tax-gift-rule.html

While I'm happy to assist you minimise your tax liabilities advising you on how to evade them is not something we are allowed to do even if we wanted to.

I do actually mean this is in cash, actual notes.
One of the previous amounts might have been a cheque but I can't remember now.
He always tells my partner that the money will go to him anyway so he might aswell have some now.
We are cetainly not asking for this money - it sounds too good to be true but he literally just handed over an envelope full of money so we have not done anything wrong

My partner asked me what to do with the money & I suggested he might be liable to pay some sort of tax on it if he sticks it all in the bank? but I really have no idea what's legal & what's illegal so that's why I came for advice as I don't want to break the law!!

mickymellon

I'd personally use the cash for your day to day expenditures and drip feed your ISA(s) and savings accounts from your salaries