Gift Payment to Parent 22 February at 8:37PM in Cutting Tax 6 replies 107 views

TheProtagonist

Hi all,
I am looking to gift my mum the sum of around £250k, which is from the proceeds of a property sale (this is fully accounted for).
It is going to be an absolute gift, with no interest or repayment. What I need to know is:

1. Should I involve a solicitor / accountant or can I just draw up a draft agreement myself?
2. What is the safest / most efficient way of transferring the money? CHAPS or bank transfer?
3. Is there likely to be any inheritance tax or any other tax applicable?

Thanks.

Mickey666

1.  Why would you need an agreement if it's an absolute gift with no strings attached?  But if you really want one then all you need to do it write out a short statement of your intent and sign it.
2. Both are perfectly safe as long as you get the numbers right   or perhaps ask your conveyancing solicitor to pay your mum the money directly.   Or even just write a cheque, but be prepared for your bank to ask questions about where you got the money from (obviously not a problem to answer if it's from a house sale and especially so if your solicitor does the transfer).
3. No taxes on the gift as such but under the PET rules the gift can be used in calculating YOUR estate's IHT if you die within seven years.

Someone will be along shortly to point out the evils of 'deprivation of assets' and a million other reasons why you shouldn't do this in case unlikely and/or unforeseen events should happen and you need the money back, but I'm guessing you're a grown up person who has already thought about those things before coming to your decision to give away £1/4m, so I'm just sticking to the questions you've asked.

Jeremy535897

If your mother is likely to die before you, and this gift would mean that inheritance tax on her death would increase, it is a bad idea. 

TheProtagonist

Hi Mickey666, thanks for your response.
I guess "agreement" was the wrong term - it's more like a statement to confirm what has happened, in case someone were to ask my mum how the money came in to her possession.
Thanks for the pointer on the IHT - I guess I just have to try not to die within 7 years

Mickey666

TheProtagonist said:

Hi Mickey666, thanks for your response.
I guess "agreement" was the wrong term - it's more like a statement to confirm what has happened, in case someone were to ask my mum how the money came in to her possession.
Thanks for the pointer on the IHT - I guess I just have to try not to die within 7 years

Be aware that even under the PET rules, the £250k would only be used in the IHT liability calculation, it doesn't automatically mean IHT will be payable because that would depend on your other assets at time of death.  If your estate PLUS the £250k was still under the IHT threshold, then no IHT would be payable.

But whatever the IHT implications, you're right that the best approach is not to die within 7 years - and preferably for a lot longer

Keep_pedalling

TheProtagonist said:

Hi Mickey666, thanks for your response.
I guess "agreement" was the wrong term - it's more like a statement to confirm what has happened, in case someone were to ask my mum how the money came in to her possession.
Thanks for the pointer on the IHT - I guess I just have to try not to die within 7 years

It’s more complicated than trying to avoid dying within 7 years. The first question is, would this gift push your mother’s estate into IHT territory? If so then maybe you are gifting too much.

You also have the odd situation where you’re estate could have to double up on IHT on this gift. If your mother dies within 7 years and you inherited it all back and you then die after her, but also before the 7 years are up then your estate will still have to factor in the gift for IHT purposes even though it was returned through inheritance. 

These are the added complications of passing money back a generation rather than the normal direction.

xylophone

Is there a particular reason for wanting to make the gift?
For example, is mother looking to buy a home?