Inheritance tax help

stingrayjjj

Thanks for all help. This is my situation, just starting to get a grip of things.  My 82yr old widowed mother (in v good health currently) wants to help out her three sons. My finances are tight right now and cd use the help. Total of her estate is estimated at around £1.1m (one property where she resides about 675,000). I'd like a gift of around 20,000 now to help me out, to help finance a BTL purchase (solely my venture). I want to make sure by brothers are in the loop and happy with release of funds. They do not need any financial help at moment. How do we best organise this? What do we have to consider long term? Obv I'm aware of the IHT Taper relief https://www.which.co.uk/money/tax/inheritance-tax/inheritance-tax-planning-and-tax-free-gifts-aw1mb2n7snwx. Is it as simple as when she passes they get 20,000 more than me from the 'pot', plus a little in loss of projected interest/stocks increase ?  

SiliconChip

If your mother has the cash available then the simplest solution is to give each of her sons the same amount now, then there's no need to worry about how to account for it in the future when her estate is distributed.

If she doesn't do that then the first question is does she have a Will, the second is do the three sons get equal amounts in the Will, and third is who is/are the executor(s)? If there is a Will, it's an equal three way split of the estate after any specified beneficiaries are paid, and you are all executors then the simplest option may be to make no change but agree to do a Deed of Variation once the value of the estate is establised so that you get £20K less than your brothers do - the estate cannot legally be distributed in any way other than what the Will says unless there is a DoV.

Keep_pedalling

It would appear that your mother is in good financial shape, and her estate as it currently stands would be liable to pay in the region of £40,000 IHT (assuming she inherited all of your father's estate) if she was to die tomorrow. If she gifted each of you a sum of money to bring her net worth below £1M then there is a reasonable chance that she will live another 7 years which would remove that tax liability.

If for instance she gifted each of you £35k tomorrow, as a means of helping you out and to potentially to reduce IHT all she would need to do is simply give it to you. The only thing she needs to do is keep a record of these gifts to make life simple for her executors when the time came.

Taper relief is not applicable to gifts under £325k and even then it only applies to the amount above that value not the whole gift.

SeniorSam

As there may be inheritance taxes when she passes if the estate is then worth more than £1,000,000, using her gifting allowances each year could help to reduce that liability.

If she can afford it, she can gift £3000 in each tax year and if she has not used her gifting allowance before, she can use the previous years allowance. Therefore £6000 of a larger gift would not count in tax calculations. If she has more income than she needs, then the surplus can be gifted each year.

You could agree with your brothers to simply take a lower share when she passes and a letter to each of them is the easiest way to do this, but it is important that your mother does make a Will.

stingrayjjj

many thanks for all yr advice. My mother has a will, we three sons are the sole beneficiaries. It looks like a Deed of Variation is the best bet.  

SeniorSam

A Deed of Variation can change the Will, but a simple Codicil may be all that is needed and be considerably lower in cost. An alternative would be that all brothers make an agreement as to how the assets are to be split and if signed with your Mothers agreement and witnessed, it should be enough for a family that are all wanting to help and not likely to fall out. The Codicil your Mother could make is more formal. Hope this helps