Inheritance tax query

billymandy

Hello, a first-time post from me after promising my 70 year old Mum I would do some internet research about an inheritance query. After reading the HMRC website I'm still a bit confused so any clarification much appreciated!

My Mum, aged 70 and in good health has recently received £50k as the first payment from a dead relative's estate. (Another £50-100k is likely once all is settled.) She is financially comfortable and has kindly said she is keen to gift this £50k to me and my sister now, which would come at a helpful time for both of us. (My sister's husband has been made redundant and I am getting married later this year.)

I have read that she could make a gift of £5k to me as a wedding gift which would be exempt from any inheritance tax. And that she can make other gifts on a regular basis provided her normal standard of living is maintained. I'm not clear though whether it is better to suggest she gives a regular monthly amount, say £2000 to us both or should we seek to use the 7 year rule whereby she gives us both £25k as a lump sum and provided she lives for 7 years after making the gift no inheritance tax is payable?

Any thoughts, please?
Thanks.

CLAPTON

how much would her estate be worth?
can her estate benefit from her spouse's IHT allowance

noh

A deed of variation could be used to alter the destination of the legacy from the relative.
http://www.hmrc.gov.uk/manuals/tsemmanual/tsem1815.htm

getmore4less

billymandy wrote: »

Hello, a first-time post from me after promising my 70 year old Mum I would do some internet research about an inheritance query. After reading the HMRC website I'm still a bit confused so any clarification much appreciated!

My Mum, aged 70 and in good health has recently received £50k as the first payment from a dead relative's estate. (Another £50-100k is likely once all is settled.) She is financially comfortable and has kindly said she is keen to gift this £50k to me and my sister now, which would come at a helpful time for both of us. (My sister's husband has been made redundant and I am getting married later this year.)

I have read that she could make a gift of £5k to me as a wedding gift which would be exempt from any inheritance tax. And that she can make other gifts on a regular basis provided her normal standard of living is maintained. I'm not clear though whether it is better to suggest she gives a regular monthly amount, say £2000 to us both or should we seek to use the 7 year rule whereby she gives us both £25k as a lump sum and provided she lives for 7 years after making the gift no inheritance tax is payable?

Any thoughts, please?
Thanks.

This has to be from income not capital. so she can't draw down capital to make gifts or keep living standards if making gifts.

If the estate is liable to IHT it might be worth looking at a variation to the relatives will to divert the money, not sure on cost but probably just a few £100 might be worth it for £50k so £20k potential IHT if over the nill rate band.

Also note above estate nillrate band could be upto £650k, with a transferable from a spouse.

billymandy

My Dad is 80 (& not in great health) and I think they have already sorted their affairs so my Mum will inherit their joint estate as efficiently as possible.

Reckon her estate would be worth >£500k.

getmore4less

billymandy wrote: »

My Dad is 80 (& not in great health) and I think they have already sorted their affairs so my Mum will inherit their joint estate as efficiently as possible.

Reckon her estate would be worth >£500k.

worth checking what they have done and if the total between them will be over £650, with this extra coming in.

billymandy

Thanks for replies & clarifying the regular gift from income and not capital position for me.

I'll take your advice and check what arrangements my parents have jointly made.

Final query, though. Would the 7 year "potentially exempt transfer" be an option? It reads to me as though it would?

Thanks again.

getmore4less

billymandy wrote: »

Thanks for replies & clarifying the regular gift from income and not capital position for me.

I'll take your advice and check what arrangements my parents have jointly made.

Final query, though. Would the 7 year "potentially exempt transfer" be an option? It reads to me as though it would?

Thanks again.

7 years is a long time.

The other issue you have is your own IHT planning if there are only 2 of you likely to inherit this at some point in the future, you could well get into issues especialy if you have a hous and any mortgage is dropping

These things are best planned across multiple generations or spend to get the total assets down.

billymandy

Good advice, thanks!

TonyMMM

Use a Deed of Variation - that will mean the inheritance will never be part of your mother's estate. In effect the legacy comes direct to you/your sister.

billymandy

TonyMMM wrote: »

Use a Deed of Variation - that will mean the inheritance will never be part of your mother's estate. In effect the legacy comes direct to you/your sister.

Would it be too late to do this in respect of the £50k already received?