Advice Pls

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My mother in law has given us £70 K and we still have another £30 k to come.
We have been told that providing nothing happens to her within in seven years we wont be slammed for tax, is that true?

Many thanks

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  • Linton
    Linton Posts: 17,243 Forumite
    Name Dropper First Post First Anniversary Hung up my suit!
    edited 9 November 2016 at 2:30PM
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    You almost certainly wont be "slammed" anyway as if MIL died in the next 7 years the £70K+£30K would simply be added to the value of her estate and Inheritance Tax , if any was due, would be charged accordingly to her estate. HMRC would only chase you if for some reason they could not get any tax due from the estate - eg if MIL was worth £400K and had given it all away before she died. If MIL didnt die within 7 years there wouldnt be any tax issue.

    The only other possible issue is if MIL is giving away her assets so that the taxpayer is forced to pay for any care home needs she may have in the future. The council could assess her needs as if she still had the assets and reduce the money they would otherwise have contributed, which could put you in a difficult position.
  • mummy2014
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    she still has plenty of money
  • bowlhead99
    bowlhead99 Posts: 12,295 Forumite
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    edited 9 November 2016 at 4:49PM
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    mummy2014 wrote: »
    she still has plenty of money
    1) there is no income tax on a UK resident who gets a gift that wasn't "earnings" or a return on their own investment.

    2) so the only tax to be concerned about is inheritance tax, with the seven year rule as you mentioned. Generally, assuming she hasn't given large gifts away in recent years, you would be free and clear, because either:

    - she will survive the 7 years and her gift to you is ignored, or
    -she won't survive the 7 years but the £100k gifts she gave you would chronologically fall within the the first £325k of her "estate" (the gifts in last 7 years before passing away, plus the remaining stuff she has at that point) and so there would still be no tax on them.

    An example of when you could get hit with a tax like Linton alludes to, is e.g. she gave away £250k to someone last year before giving you your £100k this year, then dies within 7 years of last year... and then the fact that she gave away the £250k first means that the entirety of your gift can't fit in the total £325k nil rate band available at death, so there is some inheritance tax attributable to your gift to be paid out of the remaining assets of the estate...but she has burnt through the rest of the "plenty of money" in the estate including cash and property, so the only way for hmrc to get their tax attributable to the gift, is by chasing the recepient of the gift.

    Most people don't suffer this because either, there are no other major gifts in preceding years to you getting yours, so you are in nill rate band; or there's plenty of cash at death so the estate is paying any tax arising without bothering you for it; or the gifter survives 7 years anyway and it's ignored
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