IHT403 - how to categorize recent capital gifts from bequeathments

pea60s52w

Hi

Let's say for the sake of argument (scenario tweaked to make it more generic), a husband died less than 7 years ago, bequeathed maybe £100k to kids, grandkids and nephews, and left the family home to his wife, who had two lineal descendents still living at the property with her. She sold the house in order to downsize and was living with other members of the family (and paying rent) when she died.

Question 1: Does the cash given away in her husband's bequeathments need to be included in the 403 if it was under 7 years ago?

Without it impacting on her regular income/expenditure, she was able to gift

• £50k to one of the live-in relatives who was looking to buy their own place after moving out. This is covered by a gifted deposit letter.
• £50k to the other live-in relative, a sum equivalent to their contribution to property maintenance and home improvements while living there. This is also covered by a gifted deposit letter.
• £20k on improvements to a relative's property after moving in with them - this included them installing an accessible wet room for her use. The sums she gifted by wire transfer match the invoices for the work carried out.

She paid market rate rent until she died, which covered all her bills and food, and her pension income was more than enough to cover it.

As executor, I have to submit an income tax estimation to HMRC before I can get probate before I can get detailed statements from the deceased's bank. Apart from these transactions where there already is an offline paper trail, and the payments in accordance with her husband's wishes, I literally have no visibility of anything else without getting probate first.

Question 2: what element goes where in the form e.g. gifts, grobs, POAs , previous transfers?

One person who has received gifts from the deceased since the husband's death has tried to help by contacting their own (online only) bank to provide a list of incoming sums over £250 that came from the deceased couple. The bank's response was, they don't provide a service to do this and it even advised them to drop the request - because no third party has the right to request that information from them.

Question 3: aren't a lot of digital-only, app-only estates going to be stuck in a "we-need-probate-before-IHT" race condition?

Keep_pedalling

The £100k bequeathed by her husband simply reduced the amount of transferable NRB, how long ago it was is not relevant so that goes on IHT 402 not 493. The 2 £50k payments are gifts so need to be declaimed as such on IHT 403 (less annual allowances). If the £20k was simply spent on the house adaptions for her benefit then I would not declare that as a gift.

naedanger

pea60s52w said:

Hi

Let's say for the sake of argument (scenario tweaked to make it more generic), a husband died less than 7 years ago, bequeathed maybe £100k to kids, grandkids and nephews, and left the family home to his wife, who had two lineal descendents still living at the property with her. She sold the house in order to downsize and was living with other members of the family (and paying rent) when she died.

Question 1: Does the cash given away in her husband's bequeathments need to be included in the 403 if it was under 7 years ago?

Without it impacting on her regular income/expenditure, she was able to gift

• £50k to one of the live-in relatives who was looking to buy their own place after moving out. This is covered by a gifted deposit letter.
• £50k to the other live-in relative, a sum equivalent to their contribution to property maintenance and home improvements while living there. This is also covered by a gifted deposit letter.
• £20k on improvements to a relative's property after moving in with them - this included them installing an accessible wet room for her use. The sums she gifted by wire transfer match the invoices for the work carried out.

She paid market rate rent until she died, which covered all her bills and food, and her pension income was more than enough to cover it.

As executor, I have to submit an income tax estimation to HMRC before I can get probate before I can get detailed statements from the deceased's bank. Apart from these transactions where there already is an offline paper trail, and the payments in accordance with her husband's wishes, I literally have no visibility of anything else without getting probate first.

Question 2: what element goes where in the form e.g. gifts, grobs, POAs , previous transfers?

One person who has received gifts from the deceased since the husband's death has tried to help by contacting their own (online only) bank to provide a list of incoming sums over £250 that came from the deceased couple. The bank's response was, they don't provide a service to do this and it even advised them to drop the request - because no third party has the right to request that information from them.

Question 3: aren't a lot of digital-only, app-only estates going to be stuck in a "we-need-probate-before-IHT" race condition?

I think you said on another thread that the estate is very unlikely to be anywhere near the IHT threshold. If this is the case, then I wouldn't be too concerned about getting accurate figures for gifts, use easily justified overestimates for gifts provided they are not so overestimated that it takes the estate over the IHT threshold.

It sounds like the IHT threshold that can be claimed is the wife's NRB  i.e. £325k less any gifts she has made in the last seven years, plus £325k in respect of her the late husband's nil rate band less any gifts he made to anyone other than his wife in the last seven years of his life less any money he left in his will to anyone other than his wife. In addition the lower of £350,000 or the value of the house can probably also be claimed under residence nil rate band and downsizing rules (though the forms to claim that may not be straightforward).

pea60s52w

Thanks. This whole gift  aspect of the IHT400 is sorely lacking in "plain English" guidance, and even the available walkthroughs are totally impenetrable.
In half the time I've spent trying to figure out what the 403 needs,and where, and why, I was able to do the 400 and seven other schedules without difficulty.
I'm not doing the transfer of RRNRB from the predeceased spouse because I don't see the need for that transfer, also that form would probably be more readable if Salvador Dali and MC Escher had co-written it in Tolkien's elvish after a long night on absinthe and LSD. 

naedanger

If it is obvious to HMRC that the estate is well below the IHT threshold they will spend very little time reading your return. So I don't really know why you are agonising so much over the forms.

I would just enter the figures to the best of my ability, and where I was in any doubt I would enter figures in a manner that would overstate rather than understate the potential tax liability. (Provided it was still clear the estate was well below the IHT threshold.)