IHT/death/record keeping

castle96

Hi, age 70, sister is executor. Gave 3 sons £33k each 2 years ago. Have kept records. Estate currently £650k. Divorced 30 yrs. Estate will have IHT (currently £650-325 - NRB x 40% = £60k {if you 'ignore' the recent gifts/taper}
Re the 7 years/taper... Would an executor really actually/be expected to, look at (dredge through 7 years bank stats) to ascertain if any gifts have been made? I am sure she would not voluntarily pay HMRC anything that is not 'necessary'. I don't know whether to keep my record of payments in with my will to make her job easier, or to bin them and save the gifts being included in the IHT payments. (Assume I snuff it in the next 5 years). Am I suggesting 'fraud'? Maybe you would call it that, but want to protect any monies I can. Thoughts? please

Jeremy535897

If you die within 7 years of making the £99,000 gifts, then your estate is increased by that amount, to the extent it was not covered by exemptions. You may well have had two years of annual exemptions available, for example, reducing the potentially exempt transfers to £93,000.

If you die within 7 years of making the gifts, your estate of £650,000 will be aggregated with the gifts of £93,000 (assuming the annual exemptions were available), so if the full residential nil rate band is available, the tax payable is £743,000 - £500,000 = £243,000 at 40% = £97,200. There is no taper relief, because taper relief only applies to gifts that exceed the nil rate band in themselves.

It is the duty of the executors to ensure that the correct inheritance tax is paid, taking into account lifetime gifts, and if they distribute the estate without doing so, that could be very unfortunate for the executors if HMRC discover it. For a cautionary tale see: https://www.womblebonddickinson.com/uk/insights/articles-and-briefings/gifts-made-within-seven-years-death-executors-and-beneficiaries

p00hsticks

Do your sister a huge favour and keep records (not just of your gifts, but of all your finiancial assets, bank accounts, savings, stocks and shares etc) somewhere where she can locate them easily after your death.

castle96

I do that consistantly (with or without the gifts??? See Q) But to answer my Q..........?

p00hsticks

castle96 said:

I do that consistantly (with or without the gifts??? See Q) But to answer my Q..........?

I think Jeremy535897 has already answered it - it;s an executors responsibility to identify any lifetime gifts made. You can choose whether to  make it easy or hard for them to do so, but they are potentially liable to HMRC if they fail.

Albermarle

so if the full residential nil rate band is available, the tax payable is £743,000 - £500,000 = £243,000 at 40% = £97,200.

To get the full residential nil rate band of £175K , would the OP have to specify in his will that his home is left to one , or all of his children?

If they just said in the will , my estate is left to my sons, without specifically mentioning the inheritance of the home/house, does the residential nil rate band still apply?

Jeremy535897

Yes. See: https://www.gov.uk/guidance/inheritance-tax-residence-nil-rate-band

How the direct descendants inherit the home

For homes that qualify for the residence nil rate band, there are rules about how the direct descendants inherit a home.

The home must be left to them:

• in the will of the person that’s died
• under the rules of intestacy
• by some other legal means

The home does not have to be specifically mentioned in the person’s will. It can be inherited as part of what’s left of the estate (the residue) after taking specific legacies into account.