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

getmore4less

The other issues with substantial series of gifts is the nil rate band gets used oldest first.

Leaving later gifts with a bigger tax burden along with reduced taper should it apply.

Sooner and bigger might be the best future tax mitigation option.

Grumpy_chap

justworriedabit said:

Are your referring to my post re "raises a hypothetical question"?

I think the hypothetical question is around PET and IHT, not deprivation of assets.

As I understand it, your husband's Uncle has assets of around £1m and will be gifting around £450k to your husband and a similar sum to your husband's sibling.
That will leave the Uncle with assets of around £100k.
These gifts are PET for the first 7 years against a depreciating scale.

I am sure this won't happen, but it is a technical possibility for the donor to pass shortly after the gifts are transferred.  Hence, this is considered on a hypothetical basis only, but the Uncle could die with what appears to be a small (or, even, insolvent) estate but the residual value of PET gifts would bring the estate well back into IHT territory.  @Sea_Shell then asked how that is administered as the donees will need to have the funds available to pay the IHT liability (which is not then remaining in the direct control of the Estate / Executors / Administrators) and, as a gift, the donees may have spent the money on whatever, leaving a deficit of funds for the IHT liabilty.

The hypothetical question only arises because of the high percentage of the estate that the Uncle is looking to gift.  The Uncle currently has an Estate of around £1m, so IHT would be typically in the range £250k - £300k.  If the £900k is gifted, leaving a residual Estate of £100k, and the recipients spend the gifted money in full, how will the IHT liability be met if the donor passes in a short time period.  We all hope that does not happen, but the donees would be wise to consider this possibility and "ring-fence" sufficient that there is not a future difficulty should an IHT liability arise against the gifted sums that cannot be met from the residual remaining within the Estate.

justworriedabit

getmore4less said:

The other issues with substantial series of gifts is the nil rate band gets used oldest first.

Leaving later gifts with a bigger tax burden along with reduced taper should it apply.

Sooner and bigger might be the best future tax mitigation option.

True, but he is under retirement age and all be well as it should he may have at least another 20 years, thanks for the info.

justworriedabit

Grumpy_chap 

The hypothetical question only arises because of the high percentage of the estate that the Uncle is looking to gift.  The Uncle currently has an Estate of around £1m, so IHT would be typically in the range £250k - £300k.  If the £900k is gifted, leaving a residual Estate of £100k, and the recipients spend the gifted money in full, how will the IHT liability be met if the donor passes in a short time period.  We all hope that does not happen, but the donees would be wise to consider this possibility and "ring-fence" sufficient that there is not a future difficulty should an IHT liability arise against the gifted sums that cannot be met from the residual remaining within the Estate.

Hopefully that will not happen and he remains in good health for 20+ years but should it happen - IHT pro-rata may be held back we shall see.

justworriedabit

Update - I've just been advised by Mr J that his uncle has thought of everything and will take out an insurance to cover any IHT liabilities to them and the other/s gifted should the situation  arise. That is very good news like cream on top of our case. 
thank you all.

Grumpy_chap

I am amazed that such an insurance policy is available!

Keep_pedalling

Just because someone is in good health now, does not eliminate the issue of deliberate deprivation of assets. Giving away virtually your entire net worth is frankly an idiotic thing to do and could lead to serious problems in the future. Even if he gets away with DDoA, he is giving away his future security and if he does ever need care the ability of greater choice in who, where and when care is delivered.

getmore4less

Grumpy_chap said:

I am amazed that such an insurance policy is available!

They even have there own name.
Google inter vivos

Grumpy_chap

Mickey666 said:

many people dread the thought of spending their final days sitting in a chair watching TV and wearing a nappy.

You are correct.  There are many others for whom that is their biggest fetish!