IHT AND ESTATE PLANNING

JJDragonLivigno

So - I am not the person needing to 'optimise' my estate. It would be for my mother who is a widow.  I have been resident with her for over 10 years and I am her 'companion' - carer should that ever arise. So care home costs would never come to it unless for some unfortunate reason she would need specialist care but it would need to be extreme for me to give up caring for her. Trying to optimise an estate whilst being legal at the same time doesn't seem to be easy. We will go to a financial planner but I was under the assumption that a lifetime gift - it it did not change the person's style of life - was not included in purposes for IHT for which she will be liable. Surely buying a house for a grandchild/child would not be included in her estate unless they sold it?  Then they would be liable to pay the tax (because they certainly wouldn't get it paid for them out of the estate....).
I just need to know what is classed as a lifetime gift that will not be added to her estate should she pass away within 7 years of that donation.  I thought the items I posted in the initial post would be classed as such but from all the posts I see here it seems they will??
thanks,
JJ

Jeremy535897

All non-exempt gifts made within seven years of death are treated as remaining in the deceased's estate for working out inheritance tax liabilities. Remember that she has a nil rate band of £325,000 and a residential nil rate band of £175,000. If her deceased husband left his estate to her, these numbers can be doubled, so potentially up to £1 million of her estate will be tax free (that assumes her house is worth at least £350,000).

If it is still likely that there will be an inheritance tax liability on her death, she can make exempt gifts up to £3,000 every tax year, plus small gifts of £250 per individual (not those who receive any gift within the £3,000), some gifts on marriage of certain relatives, and if she has surplus income, she can make regular gifts out of that.

BootcamperHF

A gift that does not impact on the donors standard of living is only effective if any such gifts are made out of surplus income rather than capital.  It is unlikely that buying a house for a grandchild could be shown to be funded out of excess income.

Jeremy535897

BootcamperHF said:

A gift that does not impact on the donors standard of living is only effective if any such gifts are made out of surplus income rather than capital.  It is unlikely that buying a house for a grandchild could be shown to be funded out of excess income.

Obviously. Nor could it be funded by a £250 gift to an individual. I never said it could.

Keep_pedalling

JJDragonLivigno said:

So - I am not the person needing to 'optimise' my estate. It would be for my mother who is a widow.  I have been resident with her for over 10 years and I am her 'companion' - carer should that ever arise. So care home costs would never come to it unless for some unfortunate reason she would need specialist care but it would need to be extreme for me to give up caring for her. Trying to optimise an estate whilst being legal at the same time doesn't seem to be easy. We will go to a financial planner but I was under the assumption that a lifetime gift - it it did not change the person's style of life - was not included in purposes for IHT for which she will be liable. Surely buying a house for a grandchild/child would not be included in her estate unless they sold it?  Then they would be liable to pay the tax (because they certainly wouldn't get it paid for them out of the estate....).
I just need to know what is classed as a lifetime gift that will not be added to her estate should she pass away within 7 years of that donation.  I thought the items I posted in the initial post would be classed as such but from all the posts I see here it seems they will??
thanks,
JJ

What is your mothers total net worth? Did she inherit her husband’s entire estate?

JJDragonLivigno

She has no money problems at all and did inherit dads entire estate

Keep_pedalling

JJDragonLivigno said:

She has no money problems at all and did inherit dads entire estate

So, she can leave you up to £1M IHT free without needing to take any specific action.

theoretica

JJDragonLivigno said:

 Surely buying a house for a grandchild/child would not be included in her estate unless they sold it?  Then they would be liable to pay the tax (because they certainly wouldn't get it paid for them out of the estate....).

Whether a gift is later sold or not is irrelevant for IHT.  Also, the IHT by default is payable from the residual estate - a gift already given may not be clawed back to pay for it, though further bequests can take it into account if the will is so written.