Donating lump sums to chldren - best option

doberryfirkin

I have a lump sum - ~£25k - that I would like to hand over to the kids to help with a down payment on a house. I know that giving away money to children, whilst alive, is a tax nightmare but can any MSE'rs help me by suggesting the best options to support the kids in getting on the property ladder whilst preventing the taxman from grabbing a substantial share? Each of the kids are over 21.

agrinnall

Why do you think giving money away is a tax nightmare? There are no taxes on gifts in the UK, you can give as much as you want to whoever you want. The only tax consequence would be of you die within 7 years of making the gift, in which case it would be included in the valuation of your estate and if that value is above the IHT limit then tax would be due.

John_Pierpoint

You could always structure it a zero interest loan in £3k chunks and then give away the obligation to repay over 7 - 8 years, if a Potentially Exempt Transfer for IHT might realistically be a problem.
Provided you have not used last year's gift exemption you can hand over the first 6k now free of IHT tax implications.

kidmugsy

Extending John's advice: I'll assume you have two children A & B and that your wife agrees with your plan.
(i) Gift half the cash to your wife.
(ii) You gift £6k to child A, using your IHT-exempt amount for 2012-13 and 2011-2012. Gift £250 to child B - also IHT-exempt.
(iii) Your wife gifts £6k to child B, using her IHT-exempt amount for 2012-13 and 2011-2012, and gifts £250 to child A.


You've got through half the money already. After April 5th 2013, each of you gift £3000 & £250 in the same pattern. If the children are patient, repeat after 05/04/2014. If they are impatient use a "potentially exempt transfer" as alluded to by John, and arrange to survive for seven years.

le_loup

or ... do it all now and arrange to survive for seven years!