Reporting a lifetime gift

dxt_2

My father wishes to make gifts of cash to his children, the total of which will exceed his nil-rate-IHT band. Does he need to submit a formal notice of such a gift to HMRC, as well as keeping his own record together with this will?

And in the case of his own record, does it have to be in the form of a special legal 'Deed of Gift' with a specific wording or is a simple file note sufficient?

Any pointers greatly appreciated.

SeniorSam

There is no need to report this, but it would be a simpe matter for him to give a dated letter stating that he is making the gift, but no legal Deed is needed. If he survives 7 years from the date of the gift, then it wll not be counted in the value of his estate.

Should he die within seven years then a proportion of the gift will be added to thevalue of his estate for the calculation of any inheritnce tax liability that there may be .

Your father, or anyone for that matter, can make a gift of £3000 to any one person in any tax year and it will not count as a gift within his estate, so he could make a £3000 gift now and anther after 6th April and then give the balance.This would reduce any potential liability if it exists.

There are many other ways to reduce the value of an estate and a good financial adviser who specialises in Wills and Trusts could possibly adise you.

Hope this helps

Sam

xylophone

He does not need to advise HMRC but he does need to keep a record with his will for his executors.

He should write a signed and dated letter to each recipient
(Full name and address of the recipient top left, business style)


- Dear John,
Enclosed herewith is a cheque for £100,000 as an absolute and unconditional gift to you from your father T.J. Brown.

Thomas John Brown
(date)

He might also wish to keep copies of the bank statements showing when the cheques were cashed.

Presumably the idea is to make PETS

See http://www.scottishwidows.co.uk/Extranet/Literature/Doc/FP0320

CLAPTON

He doesn't need to inform HMRC and he doesn't need to keep any record what so ever if he so chooses.

It is his executors who have a legal duty to deal with probate correctly at the time of death.

SeniorSam

Clapton is quite correct, it is the Executor/s of your Father's estate that will have a duty of disclosure of the gift so make sure that they are aware of this. Hopefullythe xecutors wil be family members.

Sam

mary

I have a surplus of cash that I would like to begin to off load to my children. I have 6 adult children/

From various websites I understand that you can have
1) Annual exemption where you can give max £3,000 to , lets
say Child A
2) Small gift exemption where you can give up to £250 to as many
individuals as you like, let's say £250 to Child A, B, C, D, E, F
3) Regular gifts out of your current accounts (i.e. income not
savings) to say all 6 children. Let's say £250 each child for a
year i.e. £3,000 x 6 children.

Am I interpreting this correctly?

Can I do the lot?

CLAPTON

mary wrote: »

I have a surplus of cash that I would like to begin to off load to my children. I have 6 adult children/

From various websites I understand that you can have
1) Annual exemption where you can give max £3,000 to , lets
say Child A
2) Small gift exemption where you can give up to £250 to as many
individuals as you like, let's say £250 to Child A, B, C, D, E, F
3) Regular gifts out of your current accounts (i.e. income not
savings) to say all 6 children. Let's say £250 each child for a
year i.e. £3,000 x 6 children.

Am I interpreting this correctly?

Can I do the lot?

you can give as much as you like regularly out of income to as many as you like

whether it comes from a current account is irrelevant

the annual exemption for gift from capital exclude you giving 3000 to A and then also 250 to A

unless you are thinking of dying in the next 7 years it doesn't matter anyway

mary

Not planning on going just yet!

By giving from capital, presumably you mean out of savings, right?

So A just gets £3,000 and that's it? yes/no

So small gifts of £250 to B, C, D, E, F only per year - yes/no

Plus regular gifts of 250 x 12 to B, C, D, E, F per year - yes/no

One particular child wants to make a biggish purchase shortly.
So can I give £3000 at end of March this year and then after April 5th this year, another £3,000 as a different tax year by then?

CLAPTON

mary wrote: »

Not planning on going just yet!

By giving from capital, presumably you mean out of savings, right?

So A just gets £3,000 and that's it? yes/no

So small gifts of £250 to B, C, D, E, F only per year - yes/no

Plus regular gifts of 250 x 12 to B, C, D, E, F per year - yes/no

One particular child wants to make a biggish purchase shortly.
So can I give £3000 at end of March this year and then after April 5th this year, another £3,000 as a different tax year by then?

capital means savings i.e. not your income.

of course, you can give any amount to as many people as you like out of capital, except that if you die within 7 years it will form part of your estate for IHT purposes

but if you are concerned about exempt capital gifts then

yes A only gets 3,000

yes B,C,D,E,F can have 250 each year


regular gifts from INCOME to any amount to anyone so A,B,C,D,E


Back to gifts from capital, if you gave nothing last tax year you can carry forward one year so you can give one person 3,000 from last year plus 3,000 from this year (total 6,000) and yes, after april 6th another 3,000
if you have a partner they could give the same

CLAPTON

just to add

regular does NOT mean monthly: it means regular
so once a year on their birthday would be regular
and/or at christmas would count

but it must be from income

SeniorSam

Mary, the easiest way to make regular gifts from 'income' is to set up Standing Orders' with your bank.

Do be aware of the fact that such gifts should not reduce your normal standard of living. In other words, you should not give all your income away and live off your capital, as that would be incorrect and not allowable. Just check on the rules first.

Gifts in excess of £3000 could be counted in your estate value if you die within 7 years of making the gifts. Do keep a list of gifts, to whom and on what dates. Your executors would need that when admistering your estate

Sam