Examples / templates of how to use you annual ‘Gift’ allowance with your child/children ?

Jeremy535897

AnotherJoe said:

parkerc said:

Thanks all, so am I over thinking all this then, as it sounds ripe for abuse - sadly I’m someone who wants to do things by the book.

Humour me, if there was the ‘gold standard’ way of doing this, what would the process be and exactly what words should be used/recorded etc ?

I'm going to disagree with those above. Nothing.

You need words/records for OVER £3k.

Under £3k (plus an addition for birthdays and weddings IIRC) you dont need anything.

They ask you about gifts OVER £3k, not under, because gifts under £3k are exempt so you dont need records of those.

The £3,000 is a cumulative figure. There is an exemption of £250 per person for gifts like Christmas and birthdays, and an exemption for certain gifts in consideration of marriage. It is not helpful that these limits have not been raised in nearly fifty years.

Mickey666

Keep_pedalling said:

Mickey666 said:

Keep_pedalling said:

Mickey666 said:

Keep_pedalling said:

Mickey666 said:

Just do it. 

Any possible implications that MIGHT arise will only occur after your death and an executor is dealing with your estate.  Since you'll be dead then you can't possibly get into any trouble, so forget worrying about that  

As for any IHT implications on your estate, well the executor will either find the gifts or they won't.  If they find them AND it affects any IHT payable, then the executor will pay it out of the estate - just as if you'd left a pile of letters documenting the gifts. 

If the executor doesn't find them . . . . well, that's not your problem, and it won't be a problem for anyone who has received the gifts.

Of course, this is not 'by the book' formal advice you understand

Might not be their problem but it is totally irresponsible making your executor’s job ten times harder because you could not be arsed to keep decent records.

Nonsense!

Imagine two estates, A & B.

Executor A finds there are no records of any gifts in the past 7 years.

Executor B find there are letters recording, say, three gifts in the past 7 years.

Which executor has the easiest job sorting out the estate?

Well, you might argue that executor B has been given a head start but does that mean they can simply rely on those three letters as being the whole story and therefore not bother to check for any other PETs?  I'd say not. 

So, in practice, both executors must still satisfy themselves (and the taxman) that there are no other failed PETs within the estate on which IHT may be due and that will involve going through all the estate's affairs anyway.

Unless I've missed something here?

What you are missing is that people who keep gift records do so to make life easier for their executors. As long as the records had been kept up to date I would not go trawling through 7 years of bank statements, and the number of times people sw

I record every PET and gifts covered by annual exemption If for some reason I made no gifts in any financial year I would record that as well so the executors will know it is not an oversight. 

I understand where you're coming from, but I'm suggesting there is no way that the executor can be certain that the deceased's records are correct or not, or even if they are misleading - either accidentally or wilfully. 

Is it really reasonable for an executor to take any such records at face value?  OK, so you leave a note about a gift 6 years ago - sure, the executor can explicity check for just that amount at that time.  Then you leave another note stating no gifts in the following year - is it ok for the executor to simply believe that?  What if you were deliberately trying to hide a large gift that year?  Surely the executor has an explicit duty to VERIFY everything otherwise they could be aiding and abetting IHT fraud. 

What's the executor's legal duty and liability in this respect?

There are required to take reasonable steps to ascertain any gifts made. If they don’t HMRC can fine them £3000 + 200% of tax owed. If the deceased has left meticulous records up to the time they died that should be enough. 

But that’s the thing.  The executor cannot know if the deceased has left ‘meticulous records’ or not - or rather whether they are accurate or not.
Seem to me this opens the door to easy fraud, whereby the deceased leaves lots of inaccurate or incomplete records, enough to give the executor the excuse that they have taken ‘reasonable steps’ by accepting them at face value and the chances of the taxman auditing the probate accounts are vanishingly small for ‘typical’ estates anyway.
I’m not advocating such a thing, just pointing out how flakey the rules can be in practice.

dales1

I keep a list of all gifts like badger09 does, but I also specify the type of exemption that applies - (ie annual, charity, small gift etc).

In fact I write it all out on a personal copy of the IHT403 form, for clarity.

I also keep a personal copy of IHT403 up to date each year, for my regular gifts out of income.

I analyse my income and expenditure on the form - and this is a task which would be very difficult for my executor to accomplish.

(My executor will be pleased to find that my records are completely correct and complete ) !

silvercar

I would think most executors who are not family members or close friends would only look through bank statements to identify large payments  for further investigation. Anything else they would assume to be a gift out of income or within the allowances.

Mickey666

dales1 said:

I keep a list of all gifts like badger09 does, but I also specify the type of exemption that applies - (ie annual, charity, small gift etc).

In fact I write it all out on a personal copy of the IHT403 form, for clarity.

I also keep a personal copy of IHT403 up to date each year, for my regular gifts out of income.

I analyse my income and expenditure on the form - and this is a task which would be very difficult for my executor to accomplish.

(My executor will be pleased to find that my records are completely correct and complete ) !

And HOW will your executor find that your records are completely correct and complete?
Presumably by having to check everything you have recorded and check there is nothing missing.  I’m sure they will be pleased about the outcome but I’m not so sure you will have saved them much time.
I suspect silvercar’s post is the most pragmatic one in this thread - everything else is pedantic what-iffery.

AnotherJoe

Mickey666 said:

Keep_pedalling said:

Mickey666 said:

Keep_pedalling said:

Mickey666 said:

Keep_pedalling said:

Mickey666 said:

Just do it. 

Any possible implications that MIGHT arise will only occur after your death and an executor is dealing with your estate.  Since you'll be dead then you can't possibly get into any trouble, so forget worrying about that  

As for any IHT implications on your estate, well the executor will either find the gifts or they won't.  If they find them AND it affects any IHT payable, then the executor will pay it out of the estate - just as if you'd left a pile of letters documenting the gifts. 

If the executor doesn't find them . . . . well, that's not your problem, and it won't be a problem for anyone who has received the gifts.

Of course, this is not 'by the book' formal advice you understand

Might not be their problem but it is totally irresponsible making your executor’s job ten times harder because you could not be arsed to keep decent records.

Nonsense!

Imagine two estates, A & B.

Executor A finds there are no records of any gifts in the past 7 years.

Executor B find there are letters recording, say, three gifts in the past 7 years.

Which executor has the easiest job sorting out the estate?

Well, you might argue that executor B has been given a head start but does that mean they can simply rely on those three letters as being the whole story and therefore not bother to check for any other PETs?  I'd say not. 

So, in practice, both executors must still satisfy themselves (and the taxman) that there are no other failed PETs within the estate on which IHT may be due and that will involve going through all the estate's affairs anyway.

Unless I've missed something here?

What you are missing is that people who keep gift records do so to make life easier for their executors. As long as the records had been kept up to date I would not go trawling through 7 years of bank statements, and the number of times people sw

I record every PET and gifts covered by annual exemption If for some reason I made no gifts in any financial year I would record that as well so the executors will know it is not an oversight. 

I understand where you're coming from, but I'm suggesting there is no way that the executor can be certain that the deceased's records are correct or not, or even if they are misleading - either accidentally or wilfully. 

Is it really reasonable for an executor to take any such records at face value?  OK, so you leave a note about a gift 6 years ago - sure, the executor can explicity check for just that amount at that time.  Then you leave another note stating no gifts in the following year - is it ok for the executor to simply believe that?  What if you were deliberately trying to hide a large gift that year?  Surely the executor has an explicit duty to VERIFY everything otherwise they could be aiding and abetting IHT fraud. 

What's the executor's legal duty and liability in this respect?

There are required to take reasonable steps to ascertain any gifts made. If they don’t HMRC can fine them £3000 + 200% of tax owed. If the deceased has left meticulous records up to the time they died that should be enough. 

But that’s the thing.  The executor cannot know if the deceased has left ‘meticulous records’ or not - or rather whether they are accurate or not.
Seem to me this opens the door to easy fraud, whereby the deceased leaves lots of inaccurate or incomplete records, enough to give the executor the excuse that they have taken ‘reasonable steps’ by accepting them at face value and the chances of the taxman auditing the probate accounts are vanishingly small for ‘typical’ estates anyway.
I’m not advocating such a thing, just pointing out how flakey the rules can be in practice.

Good point, especially given the numerous workarounds eg say i go to supermarket with my daughter and do a big shop and pay for it and she ends up with most of it. There's no way of tracking that and I'm certainly not going to itemise that i paid £52.73p for her out of my £59.28p bill on 15th August 2020 or that i bought her an ice cream when we went out for the day, or popped into the petrol station and paid her petrol after she'd filled up.

Too many little people (including myself in that category) fretting about few pounds (NOT including myself in that category) when the massive estates and companies pay the square root of sod all tax.

Unless you are giving whacking big sums, which I will be and that will be logged, id say fuggedaboudit.

Sea_Shell

What if the gifts were made out of a since closed account and no records kept.

Surely an executor can only go by those accounts/records available to them at the time.    

Otherwise executors would be expected to contact EVERY financial institution to ask if the deceased had any accounts with them in the last X years.   Unworkable.

Keep_pedalling

silvercar said:

I would think most executors who are not family members or close friends would only look through bank statements to identify large payments  for further investigation. Anything else they would assume to be a gift out of income or within the allowances.

They may also need to ask the family / beneficiaries if they have received gifts. If they  lie or fail to answer, then as in the following case HMRC will pursue the beneficiary rather than the executor.

https://www.step.org/industry-news/beneficiary-will-penalised-failing-reveal-lifetime-gift-executors

These cases are vary rare and the chances of things going pear shaped for an executor relying in detailed records from a testator are close to non existent. 

The only example I can find of an executor getting hit with a big IHT bill was due to his foolish trust in the sole beneficiary paying it, who then did a runner.

https://www.kctrust.co.uk/blog/2018/the-risks-and-responsibilities-of-an-executor-or-administrator-how-to-avoid-a-hefty-inheritance-tax-bill

V2001

What if a family member reimbursed another person with a cash payment for an expense.
Eg A pays B £450 because B paid for A car service. Can this be ignored as its not a gift but an expense being reimbursed? 

Jeremy535897

If the amount paid is what the original person paid, yes.