Gifted money - whether this is included in parents' assets 1 June 2022 at 6:29PM in Deaths, funerals & probate 7 replies 516 views

TwoGuitars

Hello,

I look after my beloved parents who are in their late nineties.  They have been giving me money for two years as I do everything for them, about £8,000 a year.   I have started familiarising myself with probate as I would want to do this myself when the time comes as the fees seem very high.  It should be fairly simple as I will be the sole recipient of their will/executor.  My question is about this income.  Would this have to be declared as gifts?  As it is over the threshold for gifts would this be regarded as another asset along with the house/savings/jewellery?  When you go through this process of probate, do you have to submit their bank statements to the HMRC?  We are wondering whether this could incur some inheritance tax later on.

RAS

The big questions 

What is the overall value of your parents' estate, roughly?
To whom are they leaving their assets, at the first death and second (if you know?)
Do they own, or have owned any property?

lisyloo

Inheritance tax could be due.
could they pay you instead of doing it as a gift? Or does that incur income tax or benefit complications?

Keep_pedalling

If they are gifting you £8000 a year then £6000 of that is immediately exempt. In addition if their income is greater than their expenditure then it is also possible that gifts from excess income can be used as well. 

This may all be irrelevant however if their total estate does not exceed their IHT allowances, which if they own a property worth £350k or more would be anything under £1M.

SeniorSam

Gifting allowances for inheritance tax are £325,000 each. In addition there is a residential allowance of £175,000 each. That is how the £1,000,000 allowance is made up, but as already said, if the total estate value is below that, including gifte OVER the gifting allowances mentioned, then you dont need to worry.

Items of jewellery may well have been sold off or disposed of before they pass, but just make sure that their Wills are in order and that you have been given Power of Attorney jst in case either of them have health problems before they go. Without the POA, it may cause difficulties.

bobster2

When calculating the estate value for probate, the Executor should diligently go through bank statements to identify gifts etc. But you do not generally need to submit bank statements to HMRC when you submit the IHT calculations.

If the estate value is so large that there is IHT to pay - although gifts in the 7 years prior to death are included in the calculations - it's the generally the estate that has to pay the IHT. Not the individual gift recipients (unless the total amount gifted is > £325,000 in the 7 year period).

Essentially, gifts use up the £325,000 tax free allowance first, before other assets are taken into account.

Keep_pedalling

bobster2 said:

When calculating the estate value for probate, the Executor should diligently go through bank statements to identify gifts etc. But you do not generally need to submit bank statements to HMRC when you submit the IHT calculations.

Although true for many estates that is a near impossible task because of having multiple bank accounts and regular switching of accounts. Few people now keep 7 years of bank statements either in paper or electronic for.

For estates that are way under IHT territory it does not really matter if an executor is not aware of a few previous gifts, but for larger estates then it is really important that you keep good records of all your gifting to avoid your executor having to poor through old records and to avoid them inadvertently getting themselves into difficulty with HMRC if they miss stuff. 

if you are also using gifts from excess income as part of your estate planning you also need 7 years of expenditure records, without access to those your executor will not be able to claim those exemptions without doing a vast amount of work.

TwoGuitars

Dear all,

Thank you so much for your clear, considered and helpful replies.  This has helped me a lot.  The property and assets are currently worth around 500K so your answers have given me some peace of mind as I am their only child, I'm just familiarising myself with the probate and inheritance tax processes.  Many thanks and best wishes, great forum.