How much can be given as a gift

Essex19

Good afternoon.

My father has recently passed away and left everything to my mother in his will, one of my father's wishes was that when the will was all sorted out my mum should pass some money on to my sister and I, and my 3 children.

His wish was that my sister and I get £10,000 each and my 3 children get £2000 each.

Now my question is how does this work with the inheritance tax rules as it was not written in his will ?

Thank you in advance.

McKneff

The money that your mother passes on to you all will be her money, so no tax issues at all, as far as I know

Linton

If the transactions happen exactly as you described them - ie your mother receives a lump sum inheritance part of which she chooses to pass on to her family as a gift, there is no affect on your father's inheritance tax. However should your mother die within 7 years some of the money could be treated as part of her estate and taxed accordingly.

I say "some" because there is an annual £3k total (not per individual !) gifts allowance. So if there is a concern that her estate would be sufficiently large to pay inheritance tax one option is to spread the gifts over a number of years. If she has an income greater than her needs another option is to make regular payments over several years covered by her spare income. According to HMRC guidance "gifts from income" must be part of normal ongoing expenditure to avoid IHT so her executors could have problems if they claimed that large one-off lump sum gifts were all from her inheritance income.

Savvy_Sue

How large is Dad's estate? And how large would Mum's be right now?

I'm asking, because everything passed from Dad to Mum is free of IHT. However, if Mum's estate when she dies as a result is going to be over £650,000, then it could be worth doing a Deed of Variation now, which effectively changes Dad's will so that the money comes direct to you, bypassing Mum's estate.

That avoids any of the difficulties Linton describes.

purple_haze

A Deed of Variation would be tax ineffective as it would simply reduce the transferable nil rate band pound for pound.

getmore4less

Savvy_Sue wrote: »

How large is Dad's estate? And how large would Mum's be right now?

I'm asking, because everything passed from Dad to Mum is free of IHT. However, if Mum's estate when she dies as a result is going to be over £650,000, then it could be worth doing a Deed of Variation now, which effectively changes Dad's will so that the money comes direct to you, bypassing Mum's estate.

That avoids any of the difficulties Linton describes.

NOT A GOOD IDEA as it make things worse.

A DOV reduces the transferable nil rate band by the same amount. leaving less uplift % for the mother.

If the nil rate band went up then she would be even worse of doing a DOV.

Yorkshireman99

Essex19 wrote: »

Good afternoon.

My father has recently passed away and left everything to my mother in his will, one of my father's wishes was that when the will was all sorted out my mum should pass some money on to my sister and I, and my 3 children.

His wish was that my sister and I get £10,000 each and my 3 children get £2000 each.

Now my question is how does this work with the inheritance tax rules as it was not written in his will ?

Thank you in advance.

It is not a straightforward as some will tell you. Your mother needs to get paid for professional advice from a STEP qualified solicitor or PFA to ensure she avoids the pitfalls and maximises the tax savings that are available. The fee should be much less than the savings that should be made.

Linton

getmore4less wrote: »

Using a DoV: NOT A GOOD IDEA as it make things worse.

A DOV reduces the transferable nil rate band by the same amount. leaving less uplift % for the mother.

If the nil rate band went up then she would be even worse of doing a DOV.

Exactly. A DoV is worse than the mother making the gift as the reduction in the nil rate band reduces mother's effective tax free allowance no matter how long she lives whereas any IHT arising from the gifts disappears after 7 years.

getmore4less

Yorkshireman99 wrote: »

It is not a straightforward as some will tell you. Your mother needs to get paid for professional advice from a STEP qualified solicitor or PFA to ensure she avoids the pitfalls and maximises the tax savings that are available. The fee should be much less than the savings that should be made.

Currently the tax is zero.

Without any further info you cannot say any fee should be less than saving as there may be none to have.

Savvy_Sue

Sorry, don't know WHAT I was thinking of when I posted earlier!

DOV might become useful after Mum dies, depending on the potential size of estate of who have inherited from her and what her will says.

Yorkshireman99

getmore4less wrote: »

Currently the tax is zero.

Without any further info you cannot say any fee should be less than saving as there may be none to have.

I think you are, yet again, just being deliberately obtuse. If you can't contribute something positive to a discussion then I suggest you refrain from comment. It is very well known that there are numerous opportunities for cost effective future IHT planning. Even quite simple steps with an estate of £650,000 will save several thousand pounds in future though not on the father's estate. They may be well known to the minority of people but many do not know. To suggest otherwise is simply misleading.