Money gifted before death

artemis118

My father in law wants to give my husband some money as he has been diagnosed with cancer and wants to make sure he gets some inheritance. The amount is £30,000. Will we have to pay inheritance tax or CGT?, really unsure. Would it be better for FIL to leave the money in his will to my husband. Other complication is that Mother in law has Demantia and we will need to pay for her care once FIL has passed away. They will have money to pay for this care, even after gift of £30K has been given.

RAS

An awful lot depends on where the money coems from and how long FIL survives.

Anything jointly owned will go to MIL without even going into the estate, so will be used for nursing home fees. It will not be liable for IHT though. Where do MIL's assets go after her death? Nothing you can do to alter that now. Is any house joint tenants (MIL will be sole survivor if FIl dies) or tenants in common?

FIL can leave anything that is in his sole name to who ever he wants, now or later.

This can be very difficult; I knew one family that altered their situation when the woman got breast cancer; only for the man to die of a heart attack three years later. She lived another 16 years with no recurrence.

FIl needs to talk to a lawyer urgently.

BillTrac

I was flicking through teletext earlier today. And on the finance pages(BBC2 pages 200+) is a list of duties on gifts etc. On the percentages you will need to pay dependant on the time between the gift and the gifter passing away.

Might help you to have a look.

Gloomendoom

IIRC the gift has to have been made seven years earlier to attract no tax at all.

mackemdave

Surely it all depends on the value of the estate when he passes away...Think the threashold is around £325K at the moment

donquine

artemis118 wrote: »

My father in law wants to give my husband some money as he has been diagnosed with cancer and wants to make sure he gets some inheritance. The amount is £30,000. Will we have to pay inheritance tax or CGT?, really unsure. Would it be better for FIL to leave the money in his will to my husband. Other complication is that Mother in law has Demantia and we will need to pay for her care once FIL has passed away. They will have money to pay for this care, even after gift of £30K has been given.

The urgent questions are:

What is the total value of FIL's estate?

How far advanced is MIL's dementia? If a POA is not already in place, is it possible to arrange one now, or is it too late?

Is MIL UK domiciled? (If she's British and has always lived in the UK, the answer is yes, if not, post more details and we can work this out.)

How long has FIL been given to live?

How long is MIL likely to live?

I'm aware none of the above questions are pleasant ones, however tax planning in regards to death is never an easy subject. Really sorry to hear of FIL's diagnosis - your OH must be all over the place, between that news and MIL being ill too.

Any

Basically, any gifts made prior to death attract tax. This tax gets lower and lower with time... if he survives at least 3 yrs you get taper relief, 20% of tax payable each passing year until at 7 yrs it becomes tax free..

BUT

when person dies, all goes into estate - everything person owned + gifts made 7 years prior. Every person then has allowance - ie amount which is tax free and the rest is then taxed. 40%.

HOWEVER

anything that goes to spouse is tax exempt. Also if EVERYTHING goes to spouse, spouse can keep the deceased person allowance until spouses death and then there are 2 allowances. But this needs to be discussed with specialist how this is done.

ALSO

every person has £3k a year (tax year) they can gift tax free. It is per donor, not per donee (ie only 1x £3k for each person, no matter how many children they want to give it to - they have to divide it)

So as you see this is quite complicated matter. In your case the chances are that father can give up to tax free allowance to your husband and leave the rest to spouse, that way there is no tax payable and then see whether there will be any payable at the death of the mother...

artemis118

total of both FIL & MIL estate is probably about 140k.
Too late to arrange POA for MIL, she was sectioned by consultant last Friday and is being assessed for 28 days, however we feel that she will definately need full time residential care once the 28 days are up and as they are financially secure we expect to pay for that care.
FIL has been given an expected 9 months however he is 83 and doesnt appear to be doing very well.

MIL has always lived in UK.

FIL has just transferred all their joint monies from a savings account that was set up in MIL name, this was originally done to get more benefits (ie tax relief I think)

puddy

but if you take the full estate and take 30 away, you're left with 110k

if care home fees are around 1k in your area, that would fund 110 weeks (just over 2 years), if they are cheaper then obviously you would get longer.

that also doesnt take into consideration any pension she has coming in to contribute to the fees or whether continuing care would pay for the fees (which i understand is difficult to get agreed)

2-4 years doesnt sound a huge amount of time to be honest, is it better to leave the 30 in the estate?

Mojisola

artemis118 wrote: »

Too late to arrange POA for MIL, she was sectioned by consultant last Friday and is being assessed for 28 days, however we feel that she will definately need full time residential care once the 28 days are up and as they are financially secure we expect to pay for that care.
FIL has been given an expected 9 months however he is 83 and doesnt appear to be doing very well.

Does your MIL have a will in place? If so and it leaves money to your OH then he will inherit from her. It is too late for her to write another will now. If there is a will, make sure it is somewhere safe so that it can't be destroyed by someone who would benefit more by the intestacy rules than through the will.

If she doesn't have a will and your FIL dies first, then your OH would not inherit anything from her.

puddy

Mojisola wrote: »

Does your MIL have a will in place? If so and it leaves money to your OH then he will inherit from her. It is too late for her to write another will now. If there is a will, make sure it is somewhere safe so that it can't be destroyed by someone who would benefit more by the intestacy rules than through the will.

If she doesn't have a will and your FIL dies first, then your OH would not inherit anything from her.

ive obviously misunderstood, why wouldnt the OH inherit without a will if FIL died first, isnt the OH the son of the MIL? he would be first on the list (along with any other sibs)