Potentially exempt transfer - quick q

Bossworld

Appreciate my idea of a quick question might be more complicated than it appears, but Google isn’t giving answers.

Ignoring the smaller limits on money gifts (e.g. £3k a year, weddings etc.) and unused NRB being passed from one parent to their spouse.

What are the inheritance tax rules on potentially exempt transfers, from both parents to a child? All the guides I’ve found online are written from the perspective of one parent and their individual nil rate band (NRB).

1) Both parents are alive, they make a joint gift of £20k to a child. Parent A passes away five years after the gift is made, Parent B passes away 8 years after the gift is made.

2) Is there any IHT implication (for better or worse) if it comes from a joint account? Is there a need for it to be deemed as coming “from” parent A or B?

thanks in advance

Jeremy535897

Gifts from joint accounts between couples are normally treated for inheritance tax as if each joint holder has made a gift of half the total. In your example, each of the parents would be treated as making a gift of £10,000.

To avoid this, the easiest way is to transfer funds from the joint account to an account in one parent's name before any gift to a child is made.

Bossworld

Jeremy535897 said:

Gifts from joint accounts between couples are normally treated for inheritance tax as if each joint holder has made a gift of half the total. In your example, each of the parents would be treated as making a gift of £10,000.

To avoid this, the easiest way is to transfer funds from the joint account to an account in one parent's name before any gift to a child is made.

Thanks Jeremy, nice and simple then

Keep_pedalling

Jeremy535897 said:

Gifts from joint accounts between couples are normally treated for inheritance tax as if each joint holder has made a gift of half the total. In your example, each of the parents would be treated as making a gift of £10,000.

To avoid this, the easiest way is to transfer funds from the joint account to an account in one parent's name before any gift to a child is made.

If one of the parents has life limiting health issues then you should certainly do this otherwise hedge your bets and go 50/50. 

The OP is talking quite low levels of gifting here so it is highly likely the joint assets are well below IHT territory in which case there would be no real IHT impact from an untimely death. If that is not the case then consider gifting a lot more and cover the possibility of a failed PET with term insurance.

Albermarle

 If that is not the case then consider gifting a lot more and cover the possibility of a failed PET with term insurance.

Although that assumes the child ( no age mentioned)  will accept a larger gift. In my limited experience that is not necessarily the case for older children, as they do not want to to feel too reliant on their parents generosity and/or prefer the parents to spend it on themselves.
Issues with IHT do not usually loom large in young adults priorities.

Keep_pedalling

Albermarle said:

 If that is not the case then consider gifting a lot more and cover the possibility of a failed PET with term insurance.

Although that assumes the child ( no age mentioned)  will accept a larger gift. In my limited experience that is not necessarily the case for older children, as they do not want to to feel too reliant on their parents generosity and/or prefer the parents to spend it on themselves.
Issues with IHT do not usually loom large in young adults priorities.

I really should have added and / or spend on yourself, as that is really the best way to reduce IHT. This assumes of course that the vast majority of your wealth is not tied up in your home which makes substantial spending  gifting difficult.

Bossworld

I’ve genuinely no expectations on my part, I think they’d also considered trying to change the name on the house but from extensive reading it’s unlikely that would yield any benefit and just leave a lot of headaches

To keep_pedalling’s point, the more I read the more it seems the combined allowances make this all a moot point but it’s just good to get some advice hence the high level question.

thank you for the replies 

Keep_pedalling

Bossworld said:

I’ve genuinely no expectations on my part, I think they’d also considered trying to change the name on the house but from extensive reading it’s unlikely that would yield any benefit and just leave a lot of headaches

To keep_pedalling’s point, the more I read the more it seems the combined allowances make this all a moot point but it’s just good to get some advice hence the high level question.

thank you for the replies 

You are quite right about giving your home away, that way madness lies.

Albermarle

I’ve genuinely no expectations on my part, I think they’d also considered trying to change the name on the house but from extensive reading it’s unlikely that would yield any benefit and just leave a lot of headaches

The main beneficiaries are the people who promote these schemes, using fear tactics about care home fees, inheritance tax  etc