Monetary gifts

khc

Any thoughts please about monetary gifts.

In addition to her annual 3k allowance, my Mum gave us all gifts by cheque of 10k each in March a couple of years ago.

We are dealing with the question of whether her gifts were made 'out of income' or not.

The solicitor who is doing probate has said that the year that they count as a gift is the one in which they were cashed, not the one in which the cheque was written - and given. ( clear dates on cheque book stubs and consecutive cheques - the last one to be cashed was the first written).
2 of us paid cheques in in mid March and one delayed until mid April, which the solicitor is saying means that it must be included in the following year's finances.

They are also saying that if she gave her grandchildren £250 for Christmas and £250 for their birthday as well, that neither payment can count as it is over £250 in total. I can quite understand that only £250 should count but not that the total is nothing. Of course, if she had bought them gift vouchers for birthdays then there wouldn't have been a problem!




 

Keep_pedalling

Out of income means excess income, did she have excess income to give 10’s of thousands away in a single year? If not the gifts are not exempt. 

Whether the date of gift is based on the date she gave them or when they were cashed is not really important in this case as both will be well within the 7 year rule.

Does her estate actually fall into IHT territory?  

Marcon

khc said:

Any thoughts please about monetary gifts.

In addition to her annual 3k allowance, my Mum gave us all gifts by cheque of 10k each in March a couple of years ago.

We are dealing with the question of whether her gifts were made 'out of income' or not.

The solicitor who is doing probate has said that the year that they count as a gift is the one in which they were cashed, not the one in which the cheque was written - and given. ( clear dates on cheque book stubs and consecutive cheques - the last one to be cashed was the first written).
2 of us paid cheques in in mid March and one delayed until mid April, which the solicitor is saying means that it must be included in the following year's finances.
 

It's a bit worrying that you're coming on here to check your solicitor's advice - querying your concerns with them would be the better idea, so they can deal with them, which would be both quick and easy (i.e. not cost a bomb!). A gift by cheque isn't 'complete' until the cheque is cashed. If you're still in doubt, here's the link to HMRC's own manual: https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm14882

Gifts out of income need to show a regular pattern, not be a 'one off'. This might make useful reading: https://www.gov.uk/inheritance-tax/gifts

They are also saying that if she gave her grandchildren £250 for Christmas and £250 for their birthday as well, that neither payment can count as it is over £250 in total. I can quite understand that only £250 should count but not that the total is nothing. Of course, if she had bought them gift vouchers for birthdays then there wouldn't have been a problem!
 

Gift vouchers would still be gifts (just easier to conceal that they'd been given!). 

Marcon

Keep_pedalling said:

Whether the date of gift is based on the date she gave them or when they were cashed is not really important in this case as both will be well within the 7 year rule.

But it could make a difference if they were made at least 3 years before death, and qualify for taper relief.

Keep_pedalling

Marcon said:

Keep_pedalling said:

Whether the date of gift is based on the date she gave them or when they were cashed is not really important in this case as both will be well within the 7 year rule.

But it could make a difference if they were made at least 3 years before death, and qualify for taper relief.

As the OP was talking about individual gifts of £10k it is highly unlikely that the total gifts will exceed £325k in which case taper relief does not come into play. 

SeniorSam

Have you considered that gifting need only be calculated if the amount is likely to be in excess of the normal inheritance tax allowance of £325,000 per person. If your Mum dies after your father and he gave his assets to your mother, there is an additional inheritance tax allowance of £325,000. On top of that, assuming that there was a family home that they both lived in, then there are two Residential allowances of up to £175,000 each. If the estate value is over those amounts, that is when gifting needs to be considered and not before.  Is that the case here?