Inheritance tax confusion

Kirstie17

Hi,
My Gran would not be subject to inheritance tax as her estate isn't big enough, therefore do the rules around gift giving apply? I know the allowance is up to £3000 but does that apply even if you're not subject to inheritance tax? Everything I read is related to reducing your liability to inheritance tax.

TheCyclingProgrammer

Yes, if your Gran's estate is below the IHT threshold she need not worry about gifts.

badmemory

But, and it is a big but, if she needs care which needs to be funded then those gifts could be considered deprivation of assets. Local authorities are becoming so cash strapped now that I believe they are looking ever deeper into this. So no affect on IHT but that is not the only thing to consider.

Keep_pedalling

Anyone can give away any amount they wish, it's just that gifts over £3000 remain taxable if the giver dies within 7 years of gifting the money. Although this only effects estates over the nil rate band, anyone giving such sums should keep a record of any such transactions with their will to make life easy for their executor as it still needs to be recorded on IHT form 205.

As has already been pointed out the main concern for any elderly person giving large amounts of their assets away is that the LA can claw that back if care is required at a later date.

If someone has assets of £250,000 gives away £10,000 then that is probably fine, but if they only had £25,000 to start with depreciation of assets would come into play, both as far as future care was concerned and means tested benefits.