Gifting constraints & tax

Flowerpotman

I'm new to the site. I've searched but couldn't find quite what I was looking for so I hope this subject hasn't been covered a hundred times. I also hope this is the right place.

I'm married but we have separate bank accounts, so If I gift my son some money from my bank account and then die before seven years pass would the fact that my wife lives on for that seven years mean that no tax is payable or would the money need to come from a joint account?

Also, I'm worried about my sons relationship with his girlfriend who seems to have a lot of issues so, if he got married and then things went wrong, I wouldn't be happy that half of my very hard earned money would disappear. Would some kind of trust be the answer or would getting married negate the status of the trust.

Only asking as I have blood cancer and my wife is also quite ill so I need to think about this now.

Guest101

1: How much money are you talking about, I presume it's a large amount? It would just be added to the estate for IHT purposes. But your home wouldn't form part of that, as long as you are joint tenants with your wife. So would it actually push you over the boundary?


2: You cant control what happens to the money after you gift it. Whether he spends in on cocaine and hookers, or his future wife gets it all. It's not yours anymore, so nothing you can do about it.

Newly_retired

The first issue depends on whether your estate is large enough to be subject to inheritance tax. Remember that your estate includes your house if you own it outright, but if you and your wife are joint tenants, it will pass directly to her outside of your estate, so maybe that puts you below the IHT threshold?
If IHT is an issue, and you do not survive seven years after making a gift, then it will count as part of your estate when IHT is calculated. However there are rules about certain gifts that can be made without tax. See gov.uk website.
If no IHT, there is no tax on gifts.
I'll leave someone else to answer the second issue.

Flowerpotman

Thanks for the replies. The final inheritance will be over the threshold but I want to send a lump sum and hope I or my wife live for seven years or near to it. Question is, would it need to come from a joint account or doesn't it matter?

I understand that the limit will be increased in stages and include the main property.

SuzieSue

Flowerpotman wrote: »

Thanks for the replies. The final inheritance will be over the threshold but I want to send a lump sum and hope I or my wife live for seven years or near to it. Question is, would it need to come from a joint account or doesn't it matter?

I'm not a tax accountant, but it would make sense to do it from a joint account so that if one of you died before 7 years and the other lived for over 7 years then half the amount would not be subject to inheritance tax. Also it doesn't have to be 7 years, the tax reduces the longer you live.

mgdavid

SuzieSue wrote: »

I'm not a tax accountant, but it would make sense to do it from a joint account so that if one of you died before 7 years and the other lived for over 7 years then half the amount would not be subject to inheritance tax. Also it doesn't have to be 7 years, the tax reduces the longer you live.

A minimum of 3 years has to pass before taper relief kicks in.

Flowerpotman

Thank you both for this. I'll organise a joint account.

Mojisola

Flowerpotman wrote: »

I'm married but we have separate bank accounts, so If I gift my son some money from my bank account and then die before seven years pass would the fact that my wife lives on for that seven years mean that no tax is payable or would the money need to come from a joint account?

Flowerpotman wrote: »

I'll organise a joint account.

Why don't you and your wife just give your son half the amount from your separate accounts?

Flowerpotman

Thing is though, if I died in the first year, my half could be taxed at the high rate. This is what I'm not sure about.

getmore4less

Joint tenants is a red herring it makes no difference to the IHT.

Who gets the assets determines the IHT status spouse gets exemption.

Taper relief only applies to large gift over the nil rate band.

You could use a trust but that would need more research.

If total assets under £650k relatively easy to have no IHT issues.

Flowerpotman

Thanks, I understand. I'm from a very modest background but am a skinflint that's worked hard so don't want it going up in smoke with tax. I'm sure my lad will burn through it though.

I have what I need now so thanks all.