How much can my dad legally gift his children/grandchildren without tax implications?

weegie_2

Hi quick question.

My dad would like to pass on some of his savings to his three chilldren, and his 3 grandchildren (2 at 18 years, 1 at 16 years)  How much can he transfer us each this year wihthout any tax implications - 3k?  5k?

[Deleted User]

As much as he wants. 

A potential inheritance tax issue would only come around if he were to die within 7 years.

cx6

Anybody can gift any amount to anyone without paying any tax whatsoever.

One thing to be aware of are potential inheritance tax implications - inheritance tax may be payable by your Dad's estate if the total amount he leaves (including gifts in the last 7 years) exceed the IHT allowance (currently £325k for a single person)

There is an  IHT taper allowance for gifts too.

The other thing is that it may affect your Dad if he is on (or intends to apply for) any means tested benefits.

eskbanker

weegie_2 said:

My dad would like to pass on some of his savings to his three chilldren, and his 3 grandchildren (2 at 18 years, 1 at 16 years)

cx6 said:

The other thing is that it may affect your Dad if he is on (or intends to apply for) any means tested benefits.

If he has (practically) adult grandchildren then he's presumably not in the first flush of youth, so another factor to bear in mind is the potential for such gifting to be considered as deprivation of assets in the event of needing care funding - does he have any health conditions that might suggest the need for support being foreseeable?

enthusiasticsaver

There are several ways he can gift. There is a PET limit of £3k per year but he can gift more and it will be free of IHT if he survives 7 years from the date of the gift. If he gifts out of his income rather than savings it is also free from IHT. However if he gifts all his savings then needs to go into social care without the means to pay for it then the council may consider “deprivation of assets”. 

TheMilkmansDad

have a read of this:

https://www.gov.uk/inheritance-tax/gifts

My parents give myself and Brother £3,000 each xmas and the grandkids £250 on their birthdays.

scottiescott

enthusiasticsaver said:

There are several ways he can gift. There is a PET limit of £3k per year but he can gift more and it will be free of IHT if he survives 7 years from the date of the gift. If he gifts out of his income rather than savings it is also free from IHT. However if he gifts all his savings then needs to go into social care without the means to pay for it then the council may consider “deprivation of assets”. 

How exactly would HMRC know if I gave my kids, say, £10 000 five or six or seven years before my death? Is every estate checked? Although not in an Inheritance Tax situation, I am unaware of any checks done on my mothers estate when she died. Certainly nobody asked for bank statements going back seven years to search for any payments to family members.

EssexExile

scottiescott said:

enthusiasticsaver said:

There are several ways he can gift. There is a PET limit of £3k per year but he can gift more and it will be free of IHT if he survives 7 years from the date of the gift. If he gifts out of his income rather than savings it is also free from IHT. However if he gifts all his savings then needs to go into social care without the means to pay for it then the council may consider “deprivation of assets”. 

How exactly would HMRC know if I gave my kids, say, £10 000 five or six or seven years before my death? Is every estate checked? Although not in an Inheritance Tax situation, I am unaware of any checks done on my mothers estate when she died. Certainly nobody asked for bank statements going back seven years to search for any payments to family members.

When my dad died last year I had to fill in forms with lots of questions about what he gave to who. I suppose if they didn't believe me they could check, but I have an honest face.

cx6

The answer is that the executor(s) are responsible for reporting to HMRC correctly and can be held personally responsibly for any inaccurate data provided they knew about it. If the executor doesn't know, they can't report it.

So you are right - who would know how much and when you give to anyone?

Keep_pedalling

scottiescott said:

enthusiasticsaver said:

There are several ways he can gift. There is a PET limit of £3k per year but he can gift more and it will be free of IHT if he survives 7 years from the date of the gift. If he gifts out of his income rather than savings it is also free from IHT. However if he gifts all his savings then needs to go into social care without the means to pay for it then the council may consider “deprivation of assets”. 

How exactly would HMRC know if I gave my kids, say, £10 000 five or six or seven years before my death? Is every estate checked? Although not in an Inheritance Tax situation, I am unaware of any checks done on my mothers estate when she died. Certainly nobody asked for bank statements going back seven years to search for any payments to family members.

The responsibility for providing this information is down to the executors. HMRC do no not check every estate, and they certainly don’t check estates well out of IHT territory so it very much depend on honesty. They will however be more invested in estate that fall just under paying IHT and those that do. The consequences of an executor failing to declare non-exempt gifts can can result in some pretty hefty penalties.

Anyone making such gifts should make life simple for their executor by keeping records and making sure their executors know where to find them.