Gifted money - whether this is included in parents' assets
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.
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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?
could they pay you instead of doing it as a gift? Or does that incur income tax or benefit complications?
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.
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.
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.