Is this allowable to gift to grandchildren (considering 7 year IHT exemption rule)?

Keep_pedalling

[Deleted User] said:

Keep_pedalling said:

[Deleted User] said:

Keep_pedalling said:

Happytosave said:

Keep_pedalling said:

There are no limits on how much you can gift, and anything you gift is exempt of tax. If your estate is in IHT territory, then anything gifted over your exemptions will be taxed from the remainder of your estate, but it will not add to the I.hit tax burden.

With the sums you are talking about it, all of it would be exempt anyway, as it appears you only used £1500 of last years allowance so you have £1500 to carry over into this year.

I want to actually gift the £3k in this financial year to my grandson. The £1500 (consisting of £250 sums)  I gave as various gifts was also in this financial year. So that is why I am asking if it will hit the IHT burden. I need to be aware of the 7 year rule at this time in life.

Correct me if I am wrong, but last year you gifted £1500 in total, which means you have £1500 of unused allowance to carry over, so this year you have £4500 of exempt gifts which cover the Christmas and Birthday gifts and the £3000 gift you want to give to your GC. The 7 year rule therefore does not apply to any of these gifts. 

What approximately is your net worth? If it is below your nil rate bands then your estate will not pay IHT and the 7 year rule does not even need thinking about.

I am more than happy to be corrected but I don’t think that is correct. My understanding is that you can make as many gifts of £250 as you like. That is one exemption. If, however, you wish to avail of the £3000 exemption to a person , you must reduce that £3000 by any £250 gifts made to that person but only that person. I think my link explains that. 

Small gifts up to £250

You can give as many gifts of up to £250 per person as you want during the tax year as long as you have not used another exemption on the same person.

You can, but the OP has gifted 2 lots of £250 to each person so total gifts of £500 which is covered by the £3000 annual allowance rather than the £250 rule. It is possible that these gifts could fall under the gifts from excess income exemption, if the OP has any.

Excellent. I see now. So, the £250 small gift is also per person and, if used once, cannot be used again. 

So, the op can make a gift to the grandson of £2750 maximum this year. The first gift of £250 is covered by the small gift exemption. The second £250 reduces his £3000. However, as mentioned, there is a carry forward and the full £3000 can thus be made.

It’s late but I have learnt something. Thank you!

No, the £3000 is not a limit it is an exemption. However in this case the OP has some carry over from the previous year so the whole of the planned £3500 gift will be exempt, and will fall out of the OPs estate as soon as the gift has been made. If he wanted to give more then the additional gift would be potentially exempt so would still form part of his estate for 7 years, unless the OP waits till the 6th April when they will have a nice new shiny exemption to work with.

Keep_pedalling

Mickey666 said:

Someone takes their extended family out for a slap-up meal and pays the the entire £500 bill - should they keep track of this as a possible 'gift'?
Someone takes their nieces/nephews/grandchildren for a day out at a theme park and foots the entire bill - should they keep track of that as a gift?
Someone takes their adult kids and grandkids on a skiing holiday and pays the entire £10k cost - should they keep track of that as a gift?

Does anyone in the real world really believe most people (or even the taxman) keeps a track of all these sorts of small gifts?

Technically gifts in kind should be included, but the vast majority of people don’t record them and in this specific case those small £250 cash gifts could almost certainly be discarded as gifts from normal income if the OP had exceeded their annual exemptions. 

Would I record a slap up meal? No. Would I record spending thousands on other people’s skiing holidays  (not that I would do such a thing)? Yes. Where you draw the line is a bit fuzzy to say the least. When we rent self catering holiday accommodation these day we want something with a decent garden and in warmer climes a private pool. Those sort of properties always have more than one bedroom so we invite family and friends to join us. If anyone does come we certainly don’t record half the rental cost as a gift. 

Robert_McGeddon

Keep_pedalling said:

With the sums you are talking about it, all of it would be exempt anyway, as it appears you only used £1500 of last years allowance so you have £1500 to carry over into this year.

I read the OP as meaning the £1,500 gifts already made being in the 2020/21 tax year. If this is the case (AND there is no carry-forward available from 2019/20) then not all the £3,000 gift being considered in the remainder of 2020/21 would be exempt. Perhaps the OP could clarify?

getmore4less

Also consider the administration when there are no records
.
Does HMRC expect the administrator to go through 7 years of records looking for all possible gifts.

A pro charging £250per hour that would not be a practical proposition.

A pragmatic approach is more appropriate ask around, anyone had big gifts and look for any large amount that have gone walkies over the last few years. 
Like there is no sign of the all proceeds of a house sale after a downsize.

Happytosave

Thank you everyone. So to clarify. I am still married and we actually have another grandson but I left that out for the purposes of clarity. I realise my partner can make the same gifts to other other grandson. We treat them all the same. 
So there is no carry on from 2019/2020. I have been making gifts all the while, however, I am not conscious of the 7 year rule at this stage in my life. 
So do HMRC trawl through all my bank accounts to see who I have written £250 cheques to?
Are birthday and Christmas gifts (the above £250 gifts) treated outside of the IHT 7 year exemption rule?
I basically want to know if I can in this 2020/21 financial year give £3K to my grandson and it have been acceptable to have given a total of £500 to him at Christmas and his birthday too. Plus I have given a total of £1K to my daughter and son in law (spread out over Christmas and their respective birthdays.
I still am not clear but maybe I have given a bit more information. All help appreciated!

Keep_pedalling

Happytosave said:

Thank you everyone. So to clarify. I am still married and we actually have another grandson but I left that out for the purposes of clarity. I realise my partner can make the same gifts to other other grandson. We treat them all the same. 
So there is no carry on from 2019/2020. I have been making gifts all the while, however, I am not conscious of the 7 year rule at this stage in my life. 
So do HMRC trawl through all my bank accounts to see who I have written £250 cheques to?
Are birthday and Christmas gifts (the above £250 gifts) treated outside of the IHT 7 year exemption rule?
I basically want to know if I can in this 2020/21 financial year give £3K to my grandson and it have been acceptable to have given a total of £500 to him at Christmas and his birthday too. Plus I have given a total of £1K to my daughter and son in law (spread out over Christmas and their respective birthdays.
I still am not clear but maybe I have given a bit more information. All help appreciated!

HHRC do not trawl through you records unless they decide to carry out an investigation, which is quite a rare event, but it is incumbent apron your executors to provide a truthful account of your estate, so they may have to go trawling through bank statements if you have not kept good records of your last 7 years of non exempt gifts.  

HMRCs view on Christmas and birthday gifts is a bit woolly and there is no set level at which it could be deemed to no longer be a small gift. As a married couple your estate would need to exceed £1M (assuming you own a house in worth at least £350k) before IHT is an issue, and to people with that sort of wealth, £250 for each birthday and Christmas pressie would easily be classed as a small gift and I would not be including them in my records. 

The important thing to get your head round if you have an estate that is likely to have to pay IHT, is that you should not be trying to stay within your exempt limits, but to make larger gifts. It is important to do this as early as possible to give you the best chance of surviving the 7 years so it becomes exempt. 

We exceed our exemptions most years ( new grandchild due this month, so another JISA to fund) so keep a spreadsheet of these gifts. We also keep records of any lager exempt gifts such as one off charitable gifts and gifts in contempt of marriage, so our executors are aware of what the large sums going out of our bank account was for. I now also have to record some regular monthly payments to fund one grandson’s nursery fees.

Mickey666

Keep_pedalling said:

Happytosave said:

Thank you everyone. So to clarify. I am still married and we actually have another grandson but I left that out for the purposes of clarity. I realise my partner can make the same gifts to other other grandson. We treat them all the same. 
So there is no carry on from 2019/2020. I have been making gifts all the while, however, I am not conscious of the 7 year rule at this stage in my life. 
So do HMRC trawl through all my bank accounts to see who I have written £250 cheques to?
Are birthday and Christmas gifts (the above £250 gifts) treated outside of the IHT 7 year exemption rule?
I basically want to know if I can in this 2020/21 financial year give £3K to my grandson and it have been acceptable to have given a total of £500 to him at Christmas and his birthday too. Plus I have given a total of £1K to my daughter and son in law (spread out over Christmas and their respective birthdays.
I still am not clear but maybe I have given a bit more information. All help appreciated!

HHRC do not trawl through you records unless they decide to carry out an investigation, which is quite a rare event, but it is incumbent apron your executors to provide a truthful account of your estate, so they MAY have to go trawling through bank statements if you have not kept good records of your last 7 years of non exempt gifts.  

You say 'MAY' (my emphasis) but surely a diligent executor MUST trawl back through bank statements because how can they determine if you have kept good records of your gifts over the past seven years?

Sure, you might leave a list of gifts, but how can an executor ever be certain it is an accurate list?  You may have left a list of small gifts deliberately to make them complacent about checking so that they miss some very large gifts.  Who knows?

So really, an executor SHOULD trawl back through bank statements as it's the only way to be certain.  Leaving a list therefore makes little difference to an executor's workload . . . . if they are truly diligent in their work.

Keep_pedalling

Mickey666 said:

Keep_pedalling said:

Happytosave said:

Thank you everyone. So to clarify. I am still married and we actually have another grandson but I left that out for the purposes of clarity. I realise my partner can make the same gifts to other other grandson. We treat them all the same. 
So there is no carry on from 2019/2020. I have been making gifts all the while, however, I am not conscious of the 7 year rule at this stage in my life. 
So do HMRC trawl through all my bank accounts to see who I have written £250 cheques to?
Are birthday and Christmas gifts (the above £250 gifts) treated outside of the IHT 7 year exemption rule?
I basically want to know if I can in this 2020/21 financial year give £3K to my grandson and it have been acceptable to have given a total of £500 to him at Christmas and his birthday too. Plus I have given a total of £1K to my daughter and son in law (spread out over Christmas and their respective birthdays.
I still am not clear but maybe I have given a bit more information. All help appreciated!

HHRC do not trawl through you records unless they decide to carry out an investigation, which is quite a rare event, but it is incumbent apron your executors to provide a truthful account of your estate, so they MAY have to go trawling through bank statements if you have not kept good records of your last 7 years of non exempt gifts.  

You say 'MAY' (my emphasis) but surely a diligent executor MUST trawl back through bank statements because how can they determine if you have kept good records of your gifts over the past seven years?

Sure, you might leave a list of gifts, but how can an executor ever be certain it is an accurate list?  You may have left a list of small gifts deliberately to make them complacent about checking so that they miss some very large gifts.  Who knows?

So really, an executor SHOULD trawl back through bank statements as it's the only way to be certain.  Leaving a list therefore makes little difference to an executor's workload . . . . if they are truly diligent in their work.

Most executors in this situation will be the spouse or children of the deceased, and will know the deceased well. The children will also have been the major beneficiaries of the gifts so they are going to be able to judge whether the records are accurate or not, so your suggestion that they should have to double check 7 years of records is nuts.

Even if a solicitor is handling the estate they are not going to do that where the deceased has left comprehensive records unless they suspect there may have been deliberate under recording. 

Mickey666

You may be missing my point that an executor cannot know FOR CERTAIN how comprehensive any records left by the deceased might be.  YOU can be certain that YOUR records are comprehensive, but no one else can be so sure.

I agree with your point that someone not knowing the deceased well (eg a solicitor) is unlikely to trawl through seven years of bank statements if presented with a long list of gifts recorded by the deceased.  BUT, therein lies an easy route to hiding many gifts, perhaps very substantial ones that would affect the IHT liability of the estate.

And since it is the executor who is legally liable for such things, do you really think it is sensible to rely on a handwritten list of gifts by the deceased?

Keep_pedalling

Mickey666 said:

You may be missing my point that an executor cannot know FOR CERTAIN how comprehensive any records left by the deceased might be.  YOU can be certain that YOUR records are comprehensive, but no one else can be so sure.

I agree with your point that someone not knowing the deceased well (eg a solicitor) is unlikely to trawl through seven years of bank statements if presented with a long list of gifts recorded by the deceased.  BUT, therein lies an easy route to hiding many gifts, perhaps very substantial ones that would affect the IHT liability of the estate.

And since it is the executor who is legally liable for such things, do you really think it is sensible to rely on a handwritten list of gifts by the deceased?

An executor has to take all reasonable steps to establish what gifts were made, which includes checking the deceased personal records, checking bank statements and asking family members about gifts. Most executors don’t actually need to worry too much as most estates a well below their exemptions, although alarm bells should ring if a previously well off person is no longer so at the time of death. 

Hopefully most parents will not be daft enough to drop a child in it by appointing them as executor and falsifying their gift records. With people regularly switching bank account a lot of executors are not going to be able to go beyond the accounts held at death so in many cases it is going to be impossible to be 100% certain that you have picked up everything, in addition family members and beneficiaries have been known to lie to an executor, and in that case It will be the beneficiary HMRC will come down on not the executor as per this case.

https://www.womblebonddickinson.com/uk/insights/articles-and-briefings/gifts-made-within-seven-years-death-executors-and-beneficiaries