Inheritance tax situation - advise needed :)

Jeremy535897

getmore4less said:

With a total disregard for GWR they probably have not bothered looking at potential preowned asset interactions.

I doubt they would apply unless the cash gift was actually used for mother's benefit within 7 years of her gift.

qprjames

getmore4less said:

With a total disregard for GWR they probably have not bothered looking at potential preowned asset interactions.

Going forward, we will not make any verbal (or written) agreements so we don't trigger a possible GWR scenario.

What would be an example of these potential preowned asset interactions you mention?

qprjames

xylophone said:

Your mother can make the gift if she chooses.
Read comments and links in my other posts.

thanks xylophone for your useful comments. Sorry I took so long to reply.
I am well aware of the need to ensure any early inheritance are to be PET'S and not 'gifts with reservations' - I will make my mum aware of this as well.

With this in mind, I have been looking at the possibility of suggesting the making gifts from surplus income. I realise that this will not reduce the 300k amount, but one of the children (not me) is struggling financially. Can my mum simply pay her household bills (utilities) for that child without any IHT come back??
Also, based on her 50,000 GBP income (40k pension and 10k investment income) she is very frugal with her money (out of choice). Given the annual income figure of 50k and there are 3 children - would there be a rough amount you might think appropriate to transfer as a regular standing order payment to our bank accounts??

Thanks

Jeremy535897

Normal expenditure out of income is covered here:
https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm14231
Your question cannot be answered without knowing how much surplus net income your mother has from year to year.

Keep_pedalling

Any gifts from surplus income need to be well documented to make easier for the executors. I would suggest regular cash gifts rather than mixing her own expenditure with other people’s.

xylophone

Your mother needs to work out her net income and how much of that income she needs to maintain her normal standard of living.

She should then be in a position to calculate how much she can give as regular gifts out of income.

Let's suppose she works out that she can give £6000 per year per child.

She could then set up a SO for £500 a month to each child.

This would establish a regular pattern of gifting which can be used when the time comes to deal with HMRC.

getmore4less

qprjames said:

getmore4less said:

With a total disregard for GWR they probably have not bothered looking at potential preowned asset interactions.

Going forward, we will not make any verbal (or written) agreements so we don't trigger a possible GWR scenario.

What would be an example of these potential preowned asset interactions you mention?

HMRC have a section on it in the manuals.
https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm44000

Grumpy_chap

qprjames said:

one of the children (not me) is struggling financially. Can my mum simply pay her household bills (utilities) for that child without any IHT come back??
Also, based on her 50,000 GBP income (40k pension and 10k investment income) she is very frugal with her money (out of choice). Given the annual income figure of 50k and there are 3 children - would there be a rough amount you might think appropriate to transfer as a regular standing order payment to our bank accounts??

What would it take for your Mum to resolve the financial difficulties of the one child?  In such a way that this child does not become reliant on handouts from Mum?  Could a gift be given to that child (who needs support) but not the others?

Regarding the income and regular gifting, no-one can assess what your mother has left over as it depends on life-style, which you say is frugal.  Would you, as children, be better for your mother's interests if you encouraged her to live a more champagne-lifestyle?  I know that with my parents, they fail to keep up with a good understanding of the value of things as they reference back to their last earned salary (1990) and still applied that level right up until 2016 (Dad) and now (Mum) - we regularly have to reassure my Mum that she can afford to spend something and the price is not a rip-off.

That aside, £50k income is less than £3.5k / month after tax.  If your Mum establishes payments to each of three children at £500 / month each, that is close on half of her income.  There are few people who would think it fair to have to give half their income away.

xylophone

There are few people who would think it fair to have to give half their income away.

She does not have to give half her income away.

She has a choice about whether to give and if she gives how much to give.

nanoAccountants

The gifting of shares to the three children can be seen as a gift with reservation, for it not be seen as one, she will need to give up all benefits to the shares, which by the sounds of your question, she will not be doing. You will also need to look out for that nasty tax called Capital Gain Tax. Any value increase in the shares could attract capital gains tax when transferred. This depends on your mothers pesonal situation, and may not even be an issue, but something to bear in mind.