Redemption of mortgage through gift

karimata

Hi

Question of IHT/CGT and gift of mortgage redemption..

My widowed father is addressing some of his finances, and wishes to pay of the balance of my mortgage from some of his investments, my question is;
Paying off the £150K mortgage balance would potentially effect a £60K IHT bill (his total estate including property would easily exceed the £650K zero rate) Is this tapered after 2 years?
If my father cashes in investments to pay off the mortgage, would there also be CGT on these on top of the potential IHT?

Many thanks-Jim

getmore4less

No taper relief on gift of £150k unless part of a larger set of gifts where the total qualifies.

CGT assessment would happen at disposal and is an independent of the potential IHT.

Absolute gifts rarely make IHT situations worse.

karimata

I presume the £150K to clear the mortgage would be a considered a potentially exempt transfer and fall into any estate calculation if <7 years pass, His house value alone would account for the 650K nil rate (until that is raised, but rising house prices will probably cancel that out), so his cash and investments would certainly be over the nil rate and subject to IHT.

Would any investments redeemed as part of an estate on death be subject to CGT and IHT or just IHT? ie, is there a scenario where cashing in investments and gifting the proceeds before death is actually worse? The CGT on his investments may be significant as he has held them for many years.

Thrugelmir

Perhaps utilising the annual CGT allowance when liquidating investments should be considered. Phase the mortgage redemption. Little point in paying tax unnecessarily.

getmore4less

karimata wrote: »

Would any investments redeemed as part of an estate on death be subject to CGT and IHT or just IHT? ie, is there a scenario where cashing in investments and gifting the proceeds before death is actually worse? The CGT on his investments may be significant as he has held them for many years.

NO.

all assets get reset to DOD value for CGT purposes.

cashing investments prior to death triggers the CGT, if they then become a failed PET(gift and dies <7y) there is IHT assessment.

The house as a primary residence is CGT exempt so that may offer options