Smaller cash gifts and much larger gifts of cash and/or property

justworriedabit

Morning
My husbands uncle is asset  rich.  His property is worth close 850k. He has cash as well but not more than approx at least  100k.
The uncle is selling the house and moving to a caravan that he owns. He is in his late 60's and not married/etc.
The uncle is old style and has worked hard like most and does not want to spend money on solicitors/etc unless he needs to.
He wants to make an initial cash gift to my husband of  approx 10k.  The record of this he feels is going to be
easy, EG, when he transfers the money to my husband he will write "Gift T XXXX XXXXX"  Is that sufficient as a gift is a gift.
Then when the property is sold his main home, the cash left approx 850k from that sale  he wants to give my husband approx 400 to 450k.
That too may just be a straight bank transfer.

Question we would like to ask. Lets say the uncle transferred up to 460k to my husband and the rest or majority of it to a sibling of my husband,
who would pay the IHT tax if the uncle passed away before the 7 years and the uncle had assets of lest than 40/50k? (IE uncle did not have enough funds to pay IHT - we think he may have assets  in excess of a million if you inc his shares which he will cash in when markets pick up and will giv away to family and friends)
Question. the record of cash gift/s on smaller amounts of up to 5/10/25k etc, is the paper/bank trail ie from uncle to my husband written as "GIFT to XXX XXX"
good enough as banks keep records for year?
Question - lets say he has given away a million in cash within the year then passes away and any IHT due, the uncle not having the funds will my husband have to pay?

No offence to anyone but please help with the above if you can and we are not interested in deprivation of assets/etc as uncle is fit and of sound mind. We are not interested if uncle will have enough money to live on, possible care home fees/etc/etc/etc. Uncle has for a while consulted my husbands dad/family and always wanted to do something like this. .Please respect this request, thanking you in advance and all appropriate help/directions appreciated.

I hope I've not confused you so in summary.
A record of smaller gifts, cash gifts in a bank trail - ie "gift to xxx xxx"?
IHT, who pays should uncle pass on within 7 years and does not have the money to meet his ITH obligations.
Thanks again.

Jeremy535897

The donee is the person primarily liable for inheritance tax on a failed PET. See:
https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/potentially-exempt-transfers/

justworriedabit

Jeremy535897 said:

The donee is the person primarily liable for inheritance tax on a failed PET. See:
https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/potentially-exempt-transfers/

Thank you. Having read the link several times and Mr J will read later tonight possibly, my understanding is that a person can give away 325k in one go and they person they gave the money/assets to will not pay IHT even if the doner fies within the 7 years. If the doner gives away more than the 325k to one or more persons and passes away within 7 years, then the downer's estate is laible. But if the estate does not have the money, then those given the gifts will be approached for the tax on the basis when it was given and tapered relief used.

Re smaller gifts of 3/5/10k etc -  would a simple piece of paper with writing do especially if there was a trail ie bank to bank to the person gifted?

Thank you again, good link but a bit complex for me.

Jeremy535897

A donor can make a gift of £325,000 in one amount and die the following day, and no inheritance tax is due on the gift, provided the donor made no non-exempt gifts in the 7 years prior to the £325,000 gift. That is because the gift, which was a potentially exempt transfer that failed, simply uses up the donor's nil rate band, with the result that any inheritance tax due on the estate is payable by the estate (it may all be subject to 40% IHT, or there may be other nil rate bands available like RNRB or unused NRBs of a deceased spouse).

Jeremy535897

For small gifts a simple letter along the lines of "Dear... I am today making you a gift of £x out of my natural love and affection for you. Yours sincerely" will do.

Mojisola

It would be worth suggesting that he keeps enough capital to pay for care, if he needs it, as he ages.

Keep_pedalling

Although for IHT purposes he should make some substantial gifts, he should not be giving be giving virtually all his wealth away. He may have 2 or 3 decades left yet and by the time he gets into his Eighties he may be need cash for more suitable accommodation. I would suggest he gives enough away to take himself out of IHT territory (assuming he survives 7 years) and no more. 

justworriedabit

Jeremy535897 said:

For small gifts a simple letter along the lines of "Dear... I am today making you a gift of £x out of my natural love and affection for you. Yours sincerely" will do.

Thank you again  I have seen good samples since asking the questions, you have been very helpful. The bottom line websites are saying is if their is a money trail etc that helps and the smaller gifts will not come as cash but bank tranfers noted as "GIFT - XXXX  XXX" Thank you again, appreciated

Sea_Shell

Taking your OP at face value, and as a hypothetical situation...and ignoring the elephant in the room like you asked us to!

I would accept the gift from this kindly gentleman, if that's what he's adamant he wants to do, however, I would not spend it, or think of it as "our money now".     

I would ringfence the money just in case in the future he were to change his mind about giving it away.  He may need it back, or you may feel that, morally, you want to pay for his care needs in the future.

Not to mention the potential for HMRC to pursue anyone for IHT owed, if the PET fails.

Sea_Shell

This thread does also raise the hypothetical question of what WOULD happen, if on the face of it, an elderly person passes away with either, what looks like, a very small estate or even an insolvent estate, having recently given all their assets away?

Any executor may renounce or no one applies to administer the estate, if intestate...but it may be that the estate SHOULD be treated as substantial, for IHT purposes, if many gifts failed the PET and should be re-added back into the estate.  

HMRC have probably got ways and means of finding out this information, regardless as to whether the estate is administered or not...but I don't know what "tools" they have at their disposal.

In OP's case, does the Uncle have a will, and who are the executors?

justworriedabit

Sea_Shell said:

This thread does also raise the hypothetical question of what WOULD happen, if on the face of it, an elderly person passes away with either, what looks like, a very small estate or even an insolvent estate, having recently given all their assets away?

Any executor may renounce or no one applies to administer the estate, if intestate...but it may be that the estate SHOULD be treated as substantial, for IHT purposes, if many gifts failed the PET and should be re-added back into the estate.  

HMRC have probably got ways and means of finding out this information, regardless as to whether the estate is administered or not...but I don't know what "tools" they have at their disposal.

In OP's case, does the Uncle have a will, and who are the executors?

Are your referring to my post re "raises a hypothetical question"?
FYI if it was not already clear to you, this uncle is of sound mind, of good health, under retirement age, has an income
via a private pension or two is my understanding.
Under HMRC rules he is clearly allowed to give his hard earned wealth away as he wishes.
Under the rules of 'deprivations of assets'  he clearly meets this rule should he ever need care home/etc as he is fighting fit.
He has nothing to hide.
His earning are legitimate and documented.
He still owns the static caravan and loves it there.
The executors are his siblings.
As stated clearly he has no children.
It is not a crime giving away the money you have worked hard for and if like my husbands uncle you
are of sound mind, in good health.
it is his money, his choice and he lives in a country that is proud of choices, freedom etc IE the UK

In your posts today you stated that when his money is gifted it should be "ring fenced." It won't be and that is final as a gift is a gift as simple as that.
In my family and my husbands family the way we all operate is that we would provide help if one of the family fell on hard times as that is just us. We would not bail out anyone that threw their money away via drink/gambling etc.

We are over the moon about it but we both understand it is not ours until my husband gets it into his account. His uncle is a man of his word and treated my husband as a son and us as a family,

I'll ask you a question and you are at your liberty to respond. How do you dine the word an outright 'gift' and how is it defined in law, ie outright gift?


https://www.gov.uk/inheritance-tax/gifts
Re deprivation of your wealth is an easy one to understand
quoted from link below

1. You must have known at the time you got rid of your property or money that you needed or may need care and support
2. Avoiding paying for care must have been a significant reason for giving away your home or reducing your savings.

https://www.ageuk.org.uk/information-advice/care/paying-for-care/paying-for-a-care-home/deprivation-of-assets

Thank you for the questions as these have made it easier for us to accept as we have never been given anything by anyone before other than the usual.