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skatersrus

Sorry, I stand corrected. I did say I studied it a while back. TBF I did study small sections of taxation, specifically from the view of inheritance.

It's still something for OP to be aware of. If nanna passses away within 7 years and gifts them the 5K plus proceeeds from the sale of the house, which could be a large amount, lets say 30K per grandchild.

It would be prudent for nanna to just keep the money in her bank account and drip it every year to grandchildren 3K at a time.

comeandgo

The money is not in her bank account, it's in a box under the bed. Nobody except the family know about it. If they will not hit inheritance tax, then she can do as she wants, if she might hit inheritance tax then it's up to her or the family if they record it or not.

Albermarle

No tax to pay on that gift, but there will be tax to be paid on cash gifts above a certain amount.

To confirm the above posts , this statement is completely incorrect.

The only potential issue with large gifts , is if they are being used to give money away deliberately to reduce the size of the estate so as to avoid IHT .

You can give away £3k without issue but any larger gift made in the 7 years previous to death will be counted for IHT purposes on a sliding scale .

If the estate in question is not likely to get close to IHT limits then this gifts rule is irrelevant.

Malthusian

skatersrus wrote: »

It would be prudent for nanna to just keep the money in her bank account and drip it every year to grandchildren 3K at a time.

If Nanna is rich enough to have an Inheritance Tax problem and wants to do something about it she should see an Independent Financial Adviser, not just tinker about at the edges with £3k a year (although it won't hurt).

Note that the OP has not said that Nanna does have an Inheritance Tax problem. Based on the information we have, the primary motivation for making gifts appears to be to get rid of the cash cluttering up her house while benefitting her heirs.

If her estate will not have an Inheritance Tax liability then the OP can forget about all this stuff about £3k allowances, it's irrelevant.

Given this is an investment forum I'm surprised no-one has wondered how long the money has been there and how much it might have grown if invested (obviously in a low cost, multi-asset, diversified fund).

This is a Savings & Investments forum, not a Spilt Milk & Sunk Costs forum.

If the OP isn't going to spend their granny's five grand in the next 5-10 years, they may want to think about investing it properly and not following their grandpa's example.

jamei305 wrote: »

There's no obligation on people to document gifts on the off-chance they might die.

If someone is making significant gifts to manage an Inheritance Tax liability they absolutely must keep a full record of their gifts as it will make their executors' job a lot easier when they die.

Especially if the money is coming from cash in old shoeboxes, which means that the executors can't even go back over their bank statements.

If their gifts are limited to £3,000 a year (plus any carry forward) they may not have to bother as the entire point of having a £3,000 annual allowance is so HMRC and executors don't have to investigate fiddling small change.

If there is no realistic chance of them having an Inheritance Tax liability they arguably don't need to keep a record. (However Inheritance Tax rules change so it could still be prudent.)


*edit*

skatersrus wrote: »

It's still something for OP to be aware of. If nanna passses away within 7 years and gifts them the 5K plus proceeeds from the sale of the house, which could be a large amount, lets say 30K per grandchild.

It would be prudent for nanna to just keep the money in her bank account and drip it every year to grandchildren 3K at a time.

There's nothing particularly imprudent about giving them more than £3k, assuming she still has enough for her own needs.


If she dies and the PETs fail, it just means her estate pays Inheritance Tax that it would have paid anyway.

Matthew2018

It is perfectly legal to have cash (for the moment!). It may not be practical or secure but consider the following:

Negative interest rates are spreading around the world, where effectively you pay the bank to keep your money. Keeping cash might be cheaper than keeping it the bank.

Banks are still going bust and although you may get your money back eventually it may be difficult to live in the short term. In this situation it might be prudent to have some spare cash outside of the banking system. As long as you can keep it safe somewhere and do not tell people that you have got it, it can become an emergency fund.

Or maybe you could use the cash to pay for some living expenses such as on groceries and petrol and let your bank account grow until you have used up the cash. In this way you do not have to notify anybody.

eskbanker

Matthew2018 wrote: »

Banks are still going bust and although you may get your money back eventually it may be difficult to live in the short term. In this situation it might be prudent to have some spare cash outside of the banking system.

When was the last time a UK bank went bust?

The FSCS rules have been tightened in recent years to introduce a timescale of seven days to pay out in such circumstances, but while a small emergency cash buffer (hundreds at most, not thousands) may not be a bad idea, it's far more sensible IMHO to protect against short-term issues with accessing funds (not just catastrophic bank failure but technical outages, disputes, card theft/loss, etc) by operating multiple accounts with different banks.

Matthew2018

eskbanker wrote: »

When was the last time a UK bank went bust?

The FSCS rules have been tightened in recent years to introduce a timescale of seven days to pay out in such circumstances, but while a small emergency cash buffer (hundreds at most, not thousands) may not be a bad idea, it's far more sensible IMHO to protect against short-term issues with accessing funds (not just catastrophic bank failure but technical outages, disputes, card theft/loss, etc) by operating multiple accounts with different banks.

Sorry I've been busy lately (probate) but I have missed you! Yes I'm not an expert I just read the news.


The banks in the UK and Europe are very interconnected with loans and other financial instruments. If a European bank goes under several UK banks could be exposed. Deutche Bank is a big bank and if it goes under could it bring down big UK Banks with it? Is Deutche Bank in trouble I don't know but it's worth finding out for yourself.

Also recently we've had a spate of financial institiutions where the accounts have not been available for several days because of the internet failure - Enemy action? Will the accounts come up next time? Will the internet itself be targetted next time?



I don't have that much cash out myself but have been considering getting out more than a day or so of cash for expenses.



These were just considerations that are not mainstream. If you don't want to do this it is up to you.

Alexland

Matthew2018 wrote: »

Also recently we've had a spate of financial institiutions where the accounts have not been available for several days because of the internet failure - Enemy action?

More likely authorised users getting their own systems in a mess due to computer scaled ineptitude.

Matthew2018

Alexland wrote: »

More likely authorised users getting their own systems in a mess due to computer scaled ineptitude.

Yes Agreed. But even more frightening. Banks will probably try harder to find and prepare for external threats than looking for the enemy within. Ineptitude is harder to counter.

eskbanker

Matthew2018 wrote: »

The banks in the UK and Europe are very interconnected with loans and other financial instruments. If a European bank goes under several UK banks could be exposed. Deutche Bank is a big bank and if it goes under could it bring down big UK Banks with it? Is Deutche Bank in trouble I don't know but it's worth finding out for yourself.

So when you said 'banks are still going bust' as if it was a fact (and relevant to a UK saver), what you actually meant was that you've read about a German bank that's had some issues but is still trading?