IHT and PETs

Mojisola

jimmo wrote: »

If you are in the fortunate position of being able to gift £200k to each of your 2 children why would you want to ensure that they would each get lumbered with an £80k tax burden if you die too early?

If the rest of the estate was going to be left to someone other than the children, it wouldn't be fair that the tax on the children's gifts should come out of someone else's inheritance.

CLAPTON

jimmo wrote: »

Whilst I claim no expertise in IHT I really find that question rather strange.

If you are in the fortunate position of being able to gift £200k to each of your 2 children why would you want to ensure that they would each get lumbered with an £80k tax burden if you die too early?

You can certainly rest assured that if your estate can’t pay the IHT bill HMRC will be able to charge your children up to £80k each in respect of the PETs but who, or what are you trying to protect?

ah but Mr X may or may not be Vigman or may be an aggrieved party

jimmo

Mojisola wrote: »

If the rest of the estate was going to be left to someone other than the children, it wouldn't be fair that the tax on the children's gifts should come out of someone else's inheritance.

True but maybe I live a simple life. Why would I stitch up my kids for the sake of someone else? Maybe the OP has different concerns but unless he or she shares them I fear the IHT experts will struggle to find a solution.

jimmo

CLAPTON wrote: »

ah but Mr X may or may not be Vigman or may be an aggrieved party

Similar to the above, in my time at IR/HMRC, particularly as a Capital Gains specialist, I reckon I spent at least 70% of the time at initial interviews working the taxpayer (sorry, customer) from the original question to the point where we identified the actual problem.

John_Pierpoint

The residuary beneficiary could be a third child or perhaps a stepmother realising she would be left poorer than she hoped.

Perhaps a life insurance policy, to pay the tax should the unexpected happen, is the solution ?

vigman

CLAPTON wrote: »

ah but Mr X may or may not be Vigman or may be an aggrieved party

I am neither!

Vigman

Mojisola

jimmo wrote: »

True but maybe I live a simple life. Why would I stitch up my kids for the sake of someone else? Maybe the OP has different concerns but unless he or she shares them I fear the IHT experts will struggle to find a solution.

I wouldn't consider giving my kids £200k "stitching them up"!

I can see a conversation going like this -

I have enough money spare to give you £200k each so that you can benefit from it now and I can see you getting the benefit from it.

Whatever's left when I die will be going to X so you need to keep some money aside just in case I die within the next seven years and tax needs to be paid on the gifts.

vigman

jimmo wrote: »

True but maybe I live a simple life. Why would I stitch up my kids for the sake of someone else? Maybe the OP has different concerns but unless he or she shares them I fear the IHT experts will struggle to find a solution.

Nothing different!? Mr X wants to leave 200k in his lifetime to 2 family members. He is aware that if he dies within 7 years (very likely in this case) they will have to pay IHT as his estate will be large.

There are two obvious choices. Let the receivers of the gifts be aware that they may have to pay up to 40% in tax on his death and therefore advise them to put this amount aside OR have their IHT taken from the total estate, which will indeed reduce the amounts gifted to others in the will.

If there are other choices, I would be pleased to hear.

TIA

Vigman

PS I am neither Mr X or a relation of his. This question is to help members in a wider family circle.

CLAPTON

vigman wrote: »

Nothing different!? Mr X wants to leave 200k in his lifetime to 2 family members. He is aware that if he dies within 7 years (very likely in this case) they will have to pay IHT as his estate will be large.

There are two obvious choices. Let the receivers of the gifts be aware that they may have to pay up to 40% in tax on his death and therefore advise them to put this amount aside OR have their IHT taken from the total estate, which will indeed reduce the amounts gifted to others in the will.

If there are other choices, I would be pleased to hear.

TIA

Vigman

PS I am neither Mr X or a relation of his. This question is to help members in a wider family circle.

Well no, not really.

the default situation, if he does nothing, is that all the IHT will be paid from the estate so the two lots of 200,000 will not be touched.

only if the estate is too small to pay the IHT due will HMRC approach the inheritors of the 200,000s

If he wants something else to happen then he needs to write something into the will

best to see a solicitor once he is clear what he wants to happen should be die within 7 years.

Hitting

If gift made annually and regularly can it be made to Family, but to different members of Family each year?