Returning gifted money to avoid inheritance tax.

Keep_pedalling

Whoops! Thank you for correcting my omission.

CLAPTON

Pollardi wrote: »

My father has savings totalling £100k. His house is worth £225k.

This takes him to the inheritance tax threshold of £325k if he owned the whole house. But he does not.

My father's partner( they were not married) died 12 years ago and left her half of the house to her daughter. Her daughter was put onto the title deeds after she died. She therefore owns half of the house, but my father lives in it alone. On his death, he leaves his half to me, his daughter and I go onto the title deeds as a joint owner with her.

Question; on his death, would my fathers estate just be valued at £100k( his savings) and £112.5k ( half the value of the house), or would the whole value of the house count, for tax purposes?

He wants to gift me £50k now, but I'm worried about the tax implications.

Many thanks for any help.

I can't think of a situation where a true gift is made during some-one's lifetime that give a worst tax outcome than not giving and inheriting in due course.

So no reason at all why the gift can't be made now.

Keep_pedalling

CLAPTON wrote: »

I can't think of a situation where a true gift is made during some-one's lifetime that give a worst tax outcome than not giving and inheriting in due course.

So no reason at all why the gift can't be made now.

To play Devils advocate I can think of one. Someone fairly well off gets gifted a large sum of money from someone whose estate is below the threshold and the a month later gets run over by a bus and the whole gift gets hit with 40% IHT.

I'm not arguing against the idea of a gift, but a lot depends on on the financial position of the OP. A lot of older people do want to give their children gifts even though in many cases their middle aged offspring are far better off than they are, and in that situation they would be better hanging on to it in case they need it or pass it on to their grandchildren who are almost certain to be in greater need.

My mum struggles to understand why I instructed her to leave what little she has to her grandchildren and my brother. We simple don't need it and are already giving over our annual allowance away each year to lower the IHT potential.

SeniorSam

Question; on his death, would my fathers estate just be valued at £100k( his savings) and £112.5k ( half the value of the house), or would the whole value of the house count, for tax purposes?

He wants to gift me £50k now, but I'm worried about the tax implications.


Not a problem other than if your Father were to need to go into care, then gifting that amount could be seen as deprevation of assets and the local authority may ask for that amount to be accounted for in respect of costs.

Other than that, there should not be a problem, Go for it.

Sam

CLAPTON

Keep_pedalling wrote: »

To play Devils advocate I can think of one. Someone fairly well off gets gifted a large sum of money from someone whose estate is below the threshold and the a month later gets run over by a bus and the whole gift gets hit with 40% IHT.

I'm not arguing against the idea of a gift, but a lot depends on on the financial position of the OP. A lot of older people do want to give their children gifts even though in many cases their middle aged offspring are far better off than they are, and in that situation they would be better hanging on to it in case they need it or pass it on to their grandchildren who are almost certain to be in greater need.

My mum struggles to understand why I instructed her to leave what little she has to her grandchildren and my brother. We simple don't need it and are already giving over our annual allowance away each year to lower the IHT potential.

Whilst happy to debate the full pros and cons, I feel it would complicate an otherwise straight forward issue and more liable to cause confusion to the OP.

Jeffnospam

Pollardi has come in with his/her own question part way though my thread but going into care and the issue of deprevation of assets and the local authority view whether this has taken place could also affect me.

I believe if the gift was made for a genuine reason when the person giving the gift was in good health and they could not foresee a care home being needed they are protected particularly the more time that passes after the first 6 months has past, as the council has to prove its case. Would people here agree with that statement?

Pollardi

Apologies to Jeffnospam as I came in half way through his thread.
It's the first time I've asked a question on a Forum and I think I did it wrong! I don't know how to start my own questions.
So sorry, I'm afraid I'm a bit of a dinosaur at this kind of Forum stuff!
Thanks for all answers though. I'm going to persuade my Dad to hang on to his money, as I feel very uncomfortable about him gifting me anything, if he might need it.

Keep_pedalling

Jeffnospam wrote: »

Pollardi has come in with his/her own question part way though my thread but going into care and the issue of deprevation of assets and the local authority view whether this has taken place could also affect me.

I believe if the gift was made for a genuine reason when the person giving the gift was in good health and they could not foresee a care home being needed they are protected particularly the more time that passes after the first 6 months has past, as the council has to prove its case. Would people here agree with that statement?

There is an Age UK fact sheet on this

http://www.ageuk.org.uk/Documents/EN-GB/Factsheets/FS40_deprivation_of_assets_in_the_means_test_for_care_home_provision_fcs.pdf?dtrk=true

Jeffnospam

No need to apologise Pollardi as your post lead to an interesting point being made.