Reporting a lifetime gift

CLAPTON

SeniorSam wrote: »

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

no, gifts from CAPITAL over 3,000 would be accounted at part of your estate for IHT purposes if you die within 7 years.

getmore4less

SeniorSam wrote: »

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

In practice gifts less than 7 years old use up the nil rate band, oldest first.

Only the amounts over the nil rate band get added back with potential for taper relief on that excess.

dxt_2

Thanks (as the OP) to those who responded to my original question about documenting a PET.

And - to the ensuing discussion about regular gifts out of income that do not affect standard of living - a further question. As well as being regular, do such gifts have to be equal? That is to say is it acceptable to give surplus income as (for example) £1000 in month 1, £100 in month 2, £2000 in month 3, etc.?

getmore4less

Than can be anything(even zero sometimes) and the definition of regular is quite vague it is the intent(and prove of it if required).

The surplus can vary the implication is the gifts can vary.

SeniorSam

Please correct me if there is presidence, but with the uncertainty of this, in my opinion, it would be prudent to establish a regular gifting of set amounts. Should you later wish to increase the set amount within an income that does not reduce the standard of living you have from within your income and not by reducing your income to a level that requires you to use your surplus capital, then that should be acceptable.

The worst thing you can do it try to be 'too smart' and bend the rules, which could result in the whole arrangement being set aside and leave yor executors problems to resolve before Probate would be granted.

Work within the rules and take the best advantage of tax planning with gifting and Trust arrangements.

Sam

CLAPTON

SeniorSam wrote: »

Please correct me if there is presidence, but with the uncertainty of this, in my opinion, it would be prudent to establish a regular gifting of set amounts. Should you later wish to increase the set amount within an income that does not reduce the standard of living you have from within your income and not by reducing your income to a level that requires you to use your surplus capital, then that should be acceptable.

The worst thing you can do it try to be 'too smart' and bend the rules, which could result in the whole arrangement being set aside and leave yor executors problems to resolve before Probate would be granted.

Work within the rules and take the best advantage of tax planning with gifting and Trust arrangements.

Sam

maybe so
but that isn't the law

SeniorSam

This is the law ,,,, https://www.gov.uk/inheritance-tax/gifts

getmore4less

The .gov is not that good these days

The sort of details you need if you want to understand IHT issues you really need to have a trawl through the HMRC manuals they give example and guidance to how inspectors should interpret the legislation.

try this one as a starting point for lifetime gifts from income

http://www.hmrc.gov.uk/manuals/ihtmanual/IHTM14243.htm