Early inheritance vs. mortgage extension?

overload99

We need to do a complete renovation on our house which we think is going to cost in the region of £70k. Our plan was to extend our mortgage to pay for this but my husband's parents have said they would like to help us with the finances. His parents are in their 70s and not in the best health although nothing life-threatening. They have a sizeable estate which would be over the inheritance tax threshold. They have 3 children, including my husband.
Is there a tax efficient way of them helping us out with our renovation costs?
Could they give us some or all of the money we need? Could they lend us some or all of the money we need? Could they pay our contractors directly?
Any advice would be greatly appreciated.

OldMusicGuy

They can give you money but it could be subject to IHT if they die within seven years of the gift, see: https://www.gov.uk/inheritance-tax/gifts.

Also, if they need to use the money to pay for care then it could be classed as deprivation of assets (just Google that). However, it sounds like they have plenty of money to cover care costs.

getmore4less

IHT is a bit of a red herring  if they keep the money it the IHT is the same.

They could gift £70k,  IHT neutral for 7 years
Potentially up to £12k could exempt immediately depending on the previous gifting that may have been done.

If you can borrow very cheap the interest cost might be a good mitigation for the 3k per year allowances.
NO other gifting in the last tax year, the current one, and the next 6
gift £12k exempt now 
gift £22k  (7y PET)
mortgage £36k   
Parents gift £3k each over the next 6 tax years to help pay off the £36k

With an estate of potentially over £1m  they should be getting IHT advice. 

Keep_pedalling

OldMusicGuy said:

They can give you money but it could be subject to IHT if they die within seven years of the gift, see: https://www.gov.uk/inheritance-tax/gifts.

Also, if they need to use the money to pay for care then it could be classed as deprivation of assets (just Google that). However, it sounds like they have plenty of money to cover care costs.

If their joint estates are in IHT territory then we are talking about an an estate in excess of £1M, so DOA should not be an issue unless the gifts leave them with no liquid assets. They certainly should not be put off gifting because of IHT, because if the worse was to happen and both die within 7 years the tax paid would be exactly the same as making no gifts at all.

If for example the joint assets are £1.3M  there is a potential IHT liability of £120k. If they gift £100k to each of their 3 children, and one of them survives 7 years then that liability is reduced to £60k if both survive 7 years the it is reduced to zero.