Gifting Money?

tipsyt12

Any advice would be appreciated.
My nan is now selling her home, when the sale has gone through is she able to give her 2 daughters a lump sum?
She also wants to give us grandchildren some many.

How much is she allowed to give by law? Someone told me we would have to pay tax on it? How do we work out how much tax? who do we have to inform? Is there a tax free amount?
Thank you

LittleVoice

Gifts are NOT taxable - so you don't need to be concerned about that.

HOWEVER where will you Nan be living after she sells her home? Is she moving to a smaller place? Is she in good health?

I ask because there are implications for Inheritance Tax if she dies in the next few years and if she were to want to claim means tested benefits.

Sweey_as_a_nut

If she want to claim means tested benefits after she gives money away, they will assume she still as the money.

tipsyt12

she is good health (for a 81 year old)bit forgetful.
she has enough in the bank at the mo to be comfortable, house was paid for in full.
she has no need to claim benefits at the moment or for the forseable future.
She has moved into a flat which she is renting for a very reasonable amount and the amount she has from pensions etc covers all her monthly outgoing leaving alot of excess. (nearer family and friends as she was very isolated)
someone told me that you can only gift 3,ooo per person per tax year then after that you have to pay tax.
she was thinking of giving her 2 daughters 20,000 each once the sale of the house goes through.
Whats inheritance tax?
Thank you for all help,greatly appreciated

Savvy_Sue

[STRIKE]Inheritance tax is where after someone has died, you have to work out how much they left and if it's over ?£325,000? the government has to be paid 40% of that.[/STRIKE]

Scrub that, have a look at the HMRC site on Inheritance Tax.

The cunning thing is that if you give away too much money in the 7 years before you die, the taxman says that money belongs in the deceased's estate. Except that up to £3000 a year is fine. And there may be other things she can via her will which minimise the amount of IHT due, if her estate is over the limit.

And, as already stated, if she has to apply for means-tested benefits or has to go into a residential home and she's given away too much money, the sums are done as if she still had the money she gave away. After all, it's not really fair if Aunty Ethel gives me her fortune when she sells her house, just so the state has to pay for everything she needs in future.

So your nan is welcome to do whatever she likes with her money, BUT there are implications.

If she hasn't got a will which reflects what she wants to happen after she dies, that would be a good first step.

tipsyt12

thank you for your replys

she is not trying to avoid paying for care if she eventually needs it.
she does have a will that states that on her death the house is to be sold and split between her 2 daughters.

Biggles

If the gifts would be to the same two people who are the sole beneficiaries, there could be some advantage in giving now.

As I understand it, if she gives them £3,000 each year those amounts would not be part of the Interhitance Tax calculation. But she can give more, and the proportion of the gift to be counted for IHT will decrease each year for seven years.

But if her total estate is going to be less than £325,000, then IHT won't be payable anyway. When did her husband die? I am unclear (someone else will know the answer) as to whether she may use his IHT threshold also, making up to £650,000 before IHT is payable.

As regards means-testing for residential care, if she is presently in good health for her age, and sufficient years have passed by the time a care home should be necessary (if that should ever occur at all), then it may well not be an issue. But if, for example she had a fall not long after gifting the money and went into care, the daughters would need to be aware that the £20,000 gift each would be counted as her assets.

sloughflint

Biggles wrote: »

As I understand it, if she gives them £3,000 each year those amounts would not be part of the Interhitance Tax calculation. But she can give more, and the proportion of the gift to be counted for IHT will decrease each year for seven years.

This only applies to gifts greater than the nil rate band, currently 325k.

Biggles wrote: »

When did her husband die? I am unclear (someone else will know the answer) as to whether she may use his IHT threshold also, making up to £650,000 before IHT is payable.

When he died is irrelevant. The key is what proportion of his estate passed to his wife.

monkeyspanner

sloughflint wrote: »

This only applies to gifts greater than the nil rate band, currently 325k.


When he died is irrelevant. The key is what proportion of his estate passed to his wife.

When the husband died is relevant. The calculation of unused IHT exemption would be based on the exemtion limit at the date of his death.

sloughflint

monkeyspanner wrote: »

When the husband died is relevant. The calculation of unused IHT exemption would be based on the exemtion limit at the date of his death.

Her total allowance would be based on the NRB at the time of her death.

Eg, if he died when the threshold was 250k with the whole of his estate passing to his wife and she died when the threshold was 325k, her allowance would be 650k. If he passed 70% of his estate to her, her allowance would be 170% of 325k not of 250k. The 250k threshold is immaterial.

Note that it isn't the unused amount of the first spouse or civil partner’s nil rate band that determines what you can transfer to the second spouse or civil partner. It's the unused percentage of the nil rate band that you transfer.

http://www.hmrc.gov.uk/inheritancetax/intro/transfer-threshold.htm

tipsyt12

Hi
Thank you for all replys.
when my grandad died,my nan didnt inherit anything as he had remarried.
I dont think inheritance tax will be a factor,she is comfortable but not that comfortable
Just getting very confused about it all
Thank you for any help