Tax implications of cash gift from mother to children.

dottysue99

My (kind of) mother-in-law (aged 93) has three children, two are married and I co-habit with the third.  MIL has recently sold a property (not her main residence) and wants to give the three children £42,000 each. She is not on benefits and has sufficient money in her bank account to keep her comfortable together with her main residence.  One of the children is on PAYE and her husband is self employed. The other two (including my partner) are self employed.  None of the children feel comfortable in using the money just in case it is needed by their mother although they think it is unlikely.  All three couples are thinking about just putting it into Premium Bonds so that it is available should it be needed to assist their mother.  They are, however, concerned about any tax implications and whether they need to advise HMRC.  I am on PAYE, would it be beneficial if my partner's £42,000 was split between him and me?  It is such a great gift to receive but seems to be causing rather a lot of headaches! 

RAS

What tax implications are they thinking about? And why do you think it could be better to split the gift between you?

If MIL dies within 7 years, there may be IHT implications, but that would be paid by the estate. Her children might therefore receive less if they are beneficiaries.

Keep_pedalling

There is no gift tax in the UK so there is no tax issue for any of her children. She would still have her house and other assets so deprivation of assets is not going to be an issue if she latter needs residential care.

There are some tax issues for her to consider. First off has she dealt with any capital gains tax liability with the sale of the property?

Any gifts from capital over her annual £3000 exemption will remain as part of her estate for 7 years, so she needs to keep records of these gifts with her will to simplify things for her executors.