Inheritance tax, student child, record-keeping question

Roseybug

Not planning to die yet, but...

Currently have assets of approx the same as the IHT allowance, mainly housing equity and some savings/investments. No spouse. No objection in principle to paying some inheritance tax, and I don't really have the means nor desire to re-arrange my finances to avoid what would be a smallish amount of tax.

However - I do object to my poor executors potentially having to untangle my daily finances in order to work out what has been given away and what would/should be taxable.

My eldest is a student. I'm paying the standard parental contribution for maintenance (although as MSE points out, this amount is never formally written down in any documentation) plus a few top ups here and there. In addition, in the vacations she sometimes does supermarket shops for me while I'm at work, and I reimburse later by transferring from my current account to hers. So in total there is quite a lot of money flowing in her direction, but none of it is "gifts" or IHT minimisation, it's just student maintenance and day-to-day household living costs.

Any tips on how I arrange things to keep everything as simple as possible for executors in the event that I expire in the next 7 years? What/how do I need to document?

Thanks in advance.

Keep_pedalling

When you say your assets are the same as the IHT allowance are you simply referring to your nil rate band or are you also including the residential NRB as well? If you have not included the latter you are way below IHT territory so I would not worry a bit it too much, otherwise just leave a note with your wills noting that you have made no potentially exempt gifts.

Jeremy535897

Payments to your children for their maintenance, education or benefit are exempt from inheritance tax, and that exemption continues while they are adults, so long as they remain in full time education. The exemption ends on the 5th April following when they cease full time education.

When that day arrives, you can still make exempt gifts of "normal expenditure out of income", but records need to be kept for that.

You reimbursing someone for money they pay out for your benefit is not a gift. HMRC are not going to pursue executors for evidence that a shopping list was for your benefit rather than your child's.

Roseybug

Thank you for the responses.

My house is roughly equal to IHT allowance + residential NRB, so there would potentially be an IHT charge on my savings, and my executor(s) would therefore have to fill in IHT paperwork. I'm thinking of changing executors to replace an older distant relative with my eldest child (the student), hence thinking about all this stuff.

Looks as if I'll be okay for a while with maintenance payments to student child, then I'll keep more detailed records after that if necessary. I guess it depends what happens to house prices and IHT/NRB thresholds over the next few years.

Albermarle

Even after she stops becoming a student , you can gift up to £3K pa , without any IHT implications later . Also a £5K wedding gift .
Plus as mentioned you can support her with daily living costs if you can prove it is coming out of your regular income .
How Inheritance Tax works: thresholds, rules and allowances: Rules on giving gifts - GOV.UK (www.gov.uk)