Inheritance Tax due from gifts to children

onthemend

Hi

I was wondering if someone could clarify this, before our mother makes some gifts to her children.

Our mother has recently been widowed and has an estate worth approximately 370k.

Would I be correct in thinking she is able to use her late husbands IHT allowance, giving a IHT threshold of 650k?

She is looking to gift £10k to her 3 children.

Would there be any tax due should she pass away within 7 years of the gift?

regards

Marcon

onthemend said:

Hi

I was wondering if someone could clarify this, before our mother makes some gifts to her children.

Our mother has recently been widowed and has an estate worth approximately 370k.

Would I be correct in thinking she is able to use her late husbands IHT allowance, giving a IHT threshold of 650k?

She is looking to gift £10k to her 3 children.

Would there be any tax due should she pass away within 7 years of the gift?

regards

If her late husband left everything to your mother, then he didn't use any part of his £325K, so this can indeed be added to her £325K, meaning the estate is well below the IHT threshold. If he left some assets to anyone other than his wife, then the £325K is reduced by the value of these.

If your mother owns a property and leaves this to children/grandchildren, that could give her scope for up to £1M before any IHT is due, so all should be all unless she wins the lottery or similar!

More info on IHT: https://www.gov.uk/inheritance-tax
and on gifts: https://www.gov.uk/inheritance-tax/gifts

SeniorSam

No. As her estate has more allowance than the assets, not tax would b payable. However, if your Mother were to need to go into care, then those gifts could be considered as 'Deprivation of Assets' and a claim may be make on those who receive those gifts.

What is the value of her residence from that £370,000 as it would seem that she does not have a great deal to manage on as it is and gifting now does not seem appropriate.

Keep_pedalling

SeniorSam said:

No. As her estate has more allowance than the assets, not tax would b payable. However, if your Mother were to need to go into care, then those gifts could be considered as 'Deprivation of Assets' and a claim may be make on those who receive those gifts.

What is the value of her residence from that £370,000 as it would seem that she does not have a great deal to manage on as it is and gifting now does not seem appropriate.

DOA is unlikely to be an issue with a gift of less than 10% of her net worth and she enough left for a good few years of self funding. 

SeniorSam

Possibly, but what if the gifts leave her with hardly enough to support her remaining years?  DOA may not be the problem but until we are aware of all the circumstances, we can only suggest some areas to be aware of, ask questions and try to help.

Keep_pedalling

SeniorSam said:

Possibly, but what if the gifts leave her with hardly enough to support her remaining years?  DOA may not be the problem but until we are aware of all the circumstances, we can only suggest some areas to be aware of, ask questions and try to help.

I have known a few asset rich but cash poor people and I agree it is not a good plAce to be.

onthemend

So the breakdown of her estate is

Property - £175,000
Bank - £175,000
Assets £20,000

Age 82 - health - not great

Gifts would still leave enough for support

Keep_pedalling

onthemend said:

So the breakdown of her estate is

Property - £175,000
Bank - £175,000
Assets £20,000

Age 82 - health - not great

Gifts would still leave enough for support

In which case there is no reason to advise against gifting, and hopefully it will give her a a great deal of pleaser actually seeing some of her money being put to good use by her family. 

getmore4less

If the kids don't need lump sums then it is fairly easy to make money "disappear"  through increased regular spending.

What sort of income are we looking at?
Is that likely to be increasing the estate if she is a bit of a saver. 

onthemend

Sogetmore4less said:

If the kids don't need lump sums then it is fairly easy to make money "disappear"  through increased regular spending.

What sort of income are we looking at?
Is that likely to be increasing the estate if she is a bit of a saver. 

So

She the property is fully owned, and she has a monthly pension income of around £1900, so we are regularly moving funds into her savings account of around £1500-£2000 a quarter from her current account.

getmore4less

There is a bit of leeway on when excess income becomes capital.
A couple of years worth of excess would not be unreasonable to count. 
(using the wooly gift from income rules that don't apply here)

There are no rules that say you can't spend/gift all your income