Receiving money from a deceased's estate

Jay_J_2

Someone wishes to give me £30,000 from his deceased's wife estate, as a gift. Would I have to pay any kind of tax on this amount or could I just pay it into an account and spend it as I choose?

LittleVoice

The gift is from the person who is alive, who presumably is funding it from the estate of his wife - unless it is that he is executor of the estate and she left the money to you.

However, £30,000 is very generous. Whether it is safe to spend it as you choose depends on why this person wants to give you the money?

Jay_J_2

He would like me to put the money towards a new house but is worried that I would have to pay tax on it. Thanks.

noh

No tax is due on gifts.

Nigel

LittleVoice

My concern was that the person giving the £30K may have wanted, for instance, to shield it from being taken into account when claiming benefits. As long as it is a gift without such, or similar, ulterior motive, then all will be well - and no tax will be due to be paid by you.

jblack_2

If it's £30,000 from his wifes estate to him he'll be liable to pay the tax. What he does with it then is up to him (subject to any clause in the will).

J

Debt_Free_Chick

sloughflint wrote: »

Surely not?

That was my reaction. Although it would be a PET and might fall into HIS estate, if he dies within the next 7 years.

localhero

Hi Jayj

There will be no income tax on this gift. There will also be no inheritance tax on the gift - otherwise known as a Potentially Exempt Transfer (PET). If the donor of the gift dies within 7 years the gift will use up the first part of the donor's nil rate band of £300,000.

The only scenario in which you could possibly pay IHT is where there's been a number of PETs that exceed the nil rate band of £300,000 in the 7 years prior to the donor's death.

So if that's not the case there's no taxation issues at all.

sloughflint

Who would pay the IHT in that scenario you described ,LH?

Debt_Free_Chick

sloughflint wrote: »

Who would pay the IHT in that scenario you described ,LH?

The deceased's estate, I would have thought.

Unless his estate exceeded the threshold and the whole lot had been gifted away in the 7 years before death .....

localhero

When calculating IHT upon death the estate will consist of anything of value upon death including any gifts made in the 7 years prior to death (PETS). Any gifts up to £300,000 made in the 7 years prior will use up the nil rate band threshold first.

Where a PET is an amount which exceeds the donor's nil rate band, IHT will be payable by the recipient if the donor dies within 7 years. So in the simple scenario where a second property is gifted worth £350,000, then the recipient may face paying £20,000 on it if the donor doesn't survive 7 years.

So assuming in Jayj's case that the total value of all the donor's gifts made in the 7 years prior to death are below the nil rate band threshold, then none of the gifts will be chargeable to IHT. The rest of the estate may well incur IHT, and that will be deducted from the estate before it's distributed to the beneficiaries.