IHT gifts.

Sevenup

My mother in law gave out some of her money to her children and grandchildren over past 7 years. She assured us that, because she was below the IHT threshold there would be no tax to pay. But I'm not so sure and I don't know if she took any advice. She isn't someone that I feel able to discuss her personal finances with.
She is, currently, alive with no property assets and is cash rich. Her husband died in 2010 and she will be able to transfer his full entitlement to her estate. While I don't have the full details, I'm fairly certain she has given away cash over the 'lifetime' limit. I do know that she would not be paying tax even if she has given away such cash as her total estate value was under £500000 (advised by her in 2015)
It is likely that I will need to deal with her estate and I am a bit concerned about liabilities that recipients might have for cash received in the past 7 years? I suspect that I might need to deal with the paperwork. Can anyone advise and allay my worries.

Yorkshireman99

Sevenup wrote: »

My mother in law gave out some of her money to her children and grandchildren over past 7 years. She assured us that, because she was below the IHT threshold there would be no tax to pay. But I'm not so sure and I don't know if she took any advice. She isn't someone that I feel able to discuss her personal finances with.
She is, currently, alive with no property assets and is cash rich. Her husband died in 2010 and she will be able to transfer his full entitlement to her estate. While I don't have the full details, I'm fairly certain she has given away cash over the 'lifetime' limit. I do know that she would not be paying tax even if she has given away such cash as her total estate value was under £500000 (advised by her in 2015)
It is likely that I will need to deal with her estate and I am a bit concerned about liabilities that recipients might have for cash received in the past 7 years? I suspect that I might need to deal with the paperwork. Can anyone advise and allay my worries.

Gifts made less than seven years ago get added back to the calculated estate to calculaye IHT liability. Against that she may be able to use part of her late husband's IHT free amount. So the advice she has had may or may not be correct. It needs researching. What is crucial is that an accurate record of the gifts and dates they made is kept.

getmore4less

You don't have enough to go on for now and if you can't talk to her about it just wait till the time comes and deal with it then.

How sure are you that over £325k has been gifted?
with a estate of 1/2m giving away £325k could well be into deprivation territory

If you want to prepare I suggest you just start researching the background to gifts, PETS, taper relief, nil rate bands and if there is a house the new property nil rate band.

An estate in the order of £1/2m if there is property could well grow to over the current dual £650k limit.

This new nil rate band which gives estates up to £1m by 2020 kicks in this April with £200k this could be a way into the MIL finances as anyone around this sort of level need to review their IHT planning so a good idea to highlight it.

Keep_pedalling

Just tell her to make sure she has documented all these gifts to make life simple for her executors. If she won't do that tell her you will no longer be willing to act in that capacity.

It will take our executors about 5 minutes to sort out that part of the IHT forms because we keep a copy of those records with our will, I dread to think how much work would be involved in trawling through 7 years of bank statements if we did not do that.

Sevenup

Thanks for the replies. Although I am not absolutely certain I think she has given away c£300000 in past 7 years. She has no property as she lives in sheltered housing and rents. I think my father in Law IHT is worth £325000 since everything went to her and nothing was given to anyone else. I therefore estimate she has a combined IHT allowance (or whatever it is called) of over £600000 has no stocks and shares and has no ownership of any other valuables except for 2 rooms of aging furniture that is of nominal value and will go to charity. The kitchen furniture belongs to the unit where she lives. From what I can gather, her whole estate will be a good bit less than £500000 and may be nearer 400000

Sevenup

The figures above include the value of all gifts that I am able to ascertain and any that I suspect have been given. £500000 would be the absolute outside estimate of her total estate

getmore4less

I would not be worrying if you have £650k nil rate band to play with look like it will be plenty for the main body of the estate

The only think I would look at in more detail would be if the total gifts exceeds £325k just to check nothing gets triggered.

I would probably do that now so I new where to find the information if it turned out I needed it later.

Yorkshireman99

getmore4less wrote: »

I would not be worrying if you have £650k nil rate band to play with look like it will be plenty for the main body of the estate

The only think I would look at in more detail would be if the total gifts exceeds £325k just to check nothing gets triggered.

I would probably do that now so I new where to find the information if it turned out I needed it later.

From what the OP said it looks as if the gifts are getting close the IHT limit so he needs to do some accurate accounting. Not easy unless the testator keeps accurate records.

Sevenup

I think that's my concern. I guess I need to know more and make sure. Thanks to everyone who has contributed. I'll need to get in to nag mode for my wife to find out more.

getmore4less

With the transferable nil rate band you get the full £650k to use up first so not a problem for the gifts

The IHT manual is a good read if you really want to worry about this now.
https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm43000
https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm14000

they cover the transferable nil rate band and PET

a google of something like below will find references that might help with how this works.
transferable nil rate band failed PET

Sevenup

Yes I. Might be worrying unnecessarily but, she has been unwell recently and it was only when I asked some questions I realise that I don't know what records there are. I guess that's my first stop after I read some more