inheritance

John_Pierpoint

Originally Posted by John_Pierpoint
Whether what you relatives are doing "makes sense" requires a whole lot more information.
sorry - what do you mean?

If you go to an accountant you will get accounting advice including tax.
If you go to a lawyer you will get legal advice, probably including tax.
However every family is different, and the tax tail should not wag the family dog, not just in terms of age but also in terms of abilities and attitudes; what is more members of a family change over time; from divorce through to addiction to substances, not to mention loss of rational faculties.

On the information given there is no one size fits all answer to the question, how could there be?

If mother in law really wants to dish out a share to others, then create a deed of family arrangement (an instrument of variation in tax man speak) to change the will of FiL within two years of the death. There are choices to be made over income tax and capital gains tax in the interim and the exercise may well cost the estate 500 - £1,000 GBP, depending on the complexity of what you as a family legally choose to do.

John_Pierpoint

ceeforcat wrote: »

There is no tax on gifts on the recipient whether £3000 or £3000000. If your MIL was to die within seven years of making the gift, this would be included in her estate subject to a tapering scale. Should her estate also fall below the inheritance tax threshold, there will be no inheritance tax to pay even if the gifts were to be included.

This might be interpreted slightly simplistically.
The donor can kick off with a gift of £6k £3k for last year + £3K for this year and then give away £3k a fiscal year in total, these gifts are simply ignored for IHT purposes.

These are gifts out of "capital", for gifts out of "income" other rules apply.

However if the gifts over this limit have occurred in the last 7 years at the date of death, they get added back and eat into the Nil rate band as at the time of death.

So yes the £3,000,000 gift may get some taper relief, but for a normal "middle class" estate, taper relief may not be relevant.

getmore4less

John_Pierpoint wrote: »

If mother in law really wants to dish out a share to others, then create a deed of family arrangement (an instrument of variation in tax man speak) to change the will of FiL within two years of the death. There are choices to be made over income tax and capital gains tax in the interim and the exercise may well cost the estate 500 - £1,000 GBP, depending on the complexity of what you as a family legally choose to do.

In most cases these are only worth doing if there is a saving in tax.
(so back to total value of the combined estate)

They don't get round the other issue like deprivation of assets.

purple_hamster

thanks! I think I get it now!

ceeforcat

John_Pierpoint wrote: »

This might be interpreted slightly simplistically.

So yes the £3,000,000 gift may get some taper relief, but for a normal "middle class" estate, taper relief may not be relevant.

Yes - I agree - although the £3000000 was used to highlight the first line of my post only - in that the recipient will never pay any tax on the gift, a specific point where the op required a little convincing!

troubleinparadise

Would there be any problems in the future, like if MIL was in long term care, could "they" claim the money to pay for that, or if she died within 7 years?

As things stand at present, simplistically those with financial assets over the threshold of £23,250 pay for care fees, whether in their own home or a residential care home.

Whilst having to pay for care is a moot point, it does allow the person a modicum of choice in what care they might receive. It would be a pity to have given away so much money that there was then no choice but to have to accept the LA's decision over care provided according to their budget.

I assume that your MIL's generous gift will still allow her to maintain the standard of living that she is accustomed to, and that she will not have to worry about paying her bills for the rest of her lifetime.

John_Pierpoint

Some insights into the end of life care costs lottery here:

https://forums.moneysavingexpert.com/discussion/4148295