Post-Death debts after cash gifts

Vect

I've been trying to track down some information with regards to cash gifts paid before death, and any complications that arise post-death within 7 years.

Hypothetical situation:

A dear old Dad has been taken ill and with a bit of luck will pull through. He wants to give his 3 kids a cash gift now as he feels he wants to see them enjoy it.

If he died, his estate would be well under the inheritance tax threshold.

However, his house is in negative equity. If he did die after gifting cash, would the bank chase the kids for cash if they sale didn't pay off the balance?

Thanks,

Vect
~Concerned bystander

Yorkshireman99

Vect wrote: »

I've been trying to track down some information with regards to cash gifts paid before death, and any complications that arise post-death within 7 years.

Hypothetical situation:

A dear old Dad has been taken ill and with a bit of luck will pull through. He wants to give his 3 kids a cash gift now as he feels he wants to see them enjoy it.

If he died, his estate would be well under the inheritance tax threshold.

However, his house is in negative equity. If he did die after gifting cash, would the bank chase the kids for cash if they sale didn't pay off the balance?

Thanks,

Correction The estate would be insolvent. He should perhaps be reducing the debt rather than giving money away to his family.

getmore4less

7 years is a period ONLY of relevance to IHT.

The answer is it depends.

A creditor can review the finances of the debtor and apply to the court to have transactions undone.

will they do that depends how much they are owed and how much is given away and if they find out.

You also have the issue of deprivation of assets should the illness require care.

silvercar

Yorkshireman99 wrote: »

If the estate did not have the funds in cash then the house would have to be sold so that the debt could be paid.

If the house is in negative equity, the sale wouldn't clear the debt.

silvercar

Vect wrote: »

I've been trying to track down some information with regards to cash gifts paid before death, and any complications that arise post-death within 7 years.

Hypothetical situation:

A dear old Dad has been taken ill and with a bit of luck will pull through. He wants to give his 3 kids a cash gift now as he feels he wants to see them enjoy it.

If he died, his estate would be well under the inheritance tax threshold.

However, his house is in negative equity. If he did die after gifting cash, would the bank chase the kids for cash if they sale didn't pay off the balance?

Thanks,

Vect
~Concerned bystander

The 7 year rule only applies to tax issues.

I doubt a creditor would have the power to go back that long.

In practice the advice would be not to 'meddle' in the estate. A relative informs the creditor (mortgage lender) that the owner of the property is deceased and that no one is taking on the role of executor. Then you all step away and leave the creditor take the property and get what they can for it and any other assets.

Assuming this is not totally hypothetical, I wish the Dad well. Hopefully he recovers and has many years to enjoy his family. In the fullness of time, the property may increase in value and the issue goes away.

Yorkshireman99

I corrected my post. Apologies. It has been a long day!

konark

Are you sure the house is in negative equity?

House prices in the UK have never been as high as they are now, they are 8% higher than the previous peak in 2007/8.


Then there's the deposit and all the repayments which reduce the amount owing.

TBF you'd have to have bought a house near a cliff edge to be in negative equity.