IHT and Loans & Gifts

oldwiring

If children have received parental loans, and the a parent decides to make a financial gift to them, must the gift be an actual payment to be recognised for IHT or is a documented reduction in the outstanding loan balance sufficient?

oldwiring

bump

CLAPTON

there is no requirement to keep records of gifts for IHT purposes although it may be useful if your affairs are very complicated.

Willman_Rodders

Hi Oldwiring,

As Clapton says there is no need to document the gifts but it makes sense to do so. If you lend your children money and die before the loan is repaid your executors should demand back the loan from your children. Documentation, stating how much and on what terms will make the task for your executors much easier. It also means that when they come to swear on oath (for Probate) that their submission is true they can be confident that it is.


When you decide that actually you are going to let the kids off their liability, you create a potentially exempt transfer; in effect you have gifted to them the money. The 7-year clock then starts ticking; survive more than 7 years and the gift falls outside of your estate for IHT purposes.

Incidentally, you can insert a clause into your will a forgiveness of debt clause , that takes care of the potential IHT liability.

oldwiring

Presumably not if the reductions of liabilty are within the exempt limits.