IHT tax-free gifts

bring_back_threepenny_bit

My mum has a large taxable Estate and has agreed to make some gifts to her 4 children, I understand she could gift £3k tax-free each year, so £750 each. Am I right in thinking she can also make further unlimited gifts to others of up to £250 each, say to her grandchildren and great-grandchildren?

JGB1955

Yes, she can. If she didn't use her gift allowance in 2020/21 she can gift £6K this financial year.

[Deleted User]

She can gift 3k this year and, if this exemption not used last year, a further £3000. You are correct with the £250 gifts. 

However she can also gift as much as she likes so long as she lives for seven years thereafter. Additionally she can also make unlimited REGULAR gifts out of income as large as she likes so long as the gift does not affect her standard of living e.g. on birthdays, Christmas etc. 

https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm14231

Jeremy535897

bring_back_threepenny_bit said:

My mum has a large taxable Estate and has agreed to make some gifts to her 4 children, I understand she could gift £3k tax-free each year, so £750 each. Am I right in thinking she can also make further unlimited gifts to others of up to £250 each, say to her grandchildren and great-grandchildren?

Yes, but this includes Christmas and birthday presents. If she had twenty grandchildren and great-grandchildren, say, she can give £28,000 a year by this method. A widow can have an estate up to £1 million without paying inheritance tax, if she has a large residential property and inherited a deceased husband's estate. Is her estate larger than this? 

bring_back_threepenny_bit

She inherited a property from her sister many years ago so there are two properties within the estate, and the second one will be hit by IHT. It's a job for a specialist solicitor which I am trying to organise.
I don't quite follow how the £28,000 is arrived at, that would seem to be £1400 each? In fact she only has 6 grand- and great-grandchildren, so does that mean she could potentially give them a maximum of £8400?

Keep_pedalling

bring_back_threepenny_bit said:

She inherited a property from her sister many years ago so there are two properties within the estate, and the second one will be hit by IHT. It's a job for a specialist solicitor which I am trying to organise.
I don't quite follow how the £28,000 is arrived at, that would seem to be £1400 each? In fact she only has 6 grand- and great-grandchildren, so does that mean she could potentially give them a maximum of £8400?

There is no maximum, she can as much as she likes. If her estate is deep into IHT territory then she should consider making larger gifts. If she does not survive 7 years after gifting then nothing has been lost because the  IHT bill will be the same as if she did not make the gifts, but if she is currently in good health then she has a good chance of surviving long enough to reduce the IHT burden. She also gets the chance to see her money being put to good use.

Jeremy535897

bring_back_threepenny_bit said:

She inherited a property from her sister many years ago so there are two properties within the estate, and the second one will be hit by IHT. It's a job for a specialist solicitor which I am trying to organise.
I don't quite follow how the £28,000 is arrived at, that would seem to be £1400 each? In fact she only has 6 grand- and great-grandchildren, so does that mean she could potentially give them a maximum of £8400?

Sorry, should be £8,000, slip of the finger.

bring_back_threepenny_bit

Hi, a further question about the same Estate, hope someone can help. Firstly, as I mentioned my Mum inherited a house from her sister many years ago, she later sold it and used the money to buy another which is the second property in the Estate. Her will grants one of my siblings a lifetime interest in the house. Is there likely to be CGT to pay on this property, when it is eventually sold, in addition to the IHT?

Keep_pedalling

bring_back_threepenny_bit said:

Hi, a further question about the same Estate, hope someone can help. Firstly, as I mentioned my Mum inherited a house from her sister many years ago, she later sold it and used the money to buy another which is the second property in the Estate. Her will grants one of my siblings a lifetime interest in the house. Is there likely to be CGT to pay on this property, when it is eventually sold, in addition to the IHT?

Yes if the gain is big enough. It really sound# like your mother should take some professional advice.

bring_back_threepenny_bit

The house cost 51k in 1985, it's probably worth 750k now. It's a big gain.

getmore4less

bring_back_threepenny_bit said:

Hi, a further question about the same Estate, hope someone can help. Firstly, as I mentioned my Mum inherited a house from her sister many years ago, she later sold it and used the money to buy another which is the second property in the Estate. Her will grants one of my siblings a lifetime interest in the house. Is there likely to be CGT to pay on this property, when it is eventually sold, in addition to the IHT?

if your mother dies then the CGT base is reset to value at DOD  with no CGT due


If sibling lives in the house then they will have private residence relief for their lifetime under the IPDI trust(life interest)


There is the other issue here that sibling then has that property in their estate(from the IPDI trust) and it may cause them IHT problems


At this asset level some multi generation IHT planning is needed urgently