Inheritance Tax on gifts to grandchildren

Vibs

Thanks all for you replies. She bought 5 items (one for each grandchild) for approx £1800 each. She told us she had bought them, we're she was keeping them but had not handed them over as yet. She bought them in the summer of 2012 and was diagnosed out of the blue with cancer in the summer of 2013 and unfortunately died this April. They were still in her house when she died in their boxes with accompanying letters, the grandchildren weren't supposed to get them for another 20 years. She still had a reasonable income when she died from her pension, dividends, interest on savings etc and would not have had to spend any capital or savings on the gifts. IHT is very complex any advice is gratefully received !

getmore4less

what do the letters say?

if they don't fall under pre death or one of those mentioned in the will they fall into the residual estate.

Brightspark87

hi! you only pay IHT if her estate (including these gifts) are over £325,000 or if her husband did not use his £650,000 (if she outlived him). You are right about the annual exemption being £3,000 a year, and you can carry back a year if it is unused.

Therefore, they do (the remaining value) form part of her estate. However, it may be that they are bot subject to inheritance tax if her estate falls below these amounts.

the gifting out of income has to be proven to be regular - ie £400 a month for over 6 months.

getmore4less

Brightspark87 wrote: »

the gifting out of income has to be proven to be regular - ie £400 a month for over 6 months.

there are loads of income disposals that would be acceptable as regular gifts, once a year would be ok even less frequent would be possible.

I suspect here there is an added complication that due to they were not due to get them they are in a trust. Will depend what the letters say.

Brightspark87

getmore4less wrote: »

there are loads of income disposals that would be acceptable as regular gifts, once a year would be ok even less frequent would be possible.

It does not have to be monthly but it has to be regularly that was an example. Many grandparents pay school fees for instance which can be annually but there must be the intention of regular gifting.