Implications for gifts of money (or equivalent) before death

OldSmithy

Following my dad passing away earlier this year I have just completed the process as executor of sorting out his estate. Mum is still alive and inherits all of his money. The property was held as tenants in common (50:50) and so mum can live it and then dads share will pass to family in accordance with his wishes once she passes. Mums will do the same unless she changes anything between now and then which is very unlikely. 

My dads estate was below the £325k inheritance tax threshold. 

Having told mum about the money she is now inheriting she is wanting to make a payment/gift to family now, along the lines of her (and dads) wills as they were mirror wills. I’ve told her to spend it and enjoy herself and/or to keep it in case she needs care in future but she really is keen to pass at least some on now and see us enjoy ourselves a little with it. 

Can I ask, I know the rules around the £3k and also the 7 years “rule” for larger sums. If she pays a larger sum over the £3k and passes away within the 7 year window am I correct that these sums will need to be added back (amounts depending where through the 7 years we are) to her estate for the purpose of checking possible inheritance tax?  Is this the only tax implication or would we as family members and recipients be liable for any other possible taxes or payments?

I’d like to understand the full implications before she wants to discuss it again. I don’t believe she will be over the threshold either as I believe this may increase above the £325k also if she is leaving everything To family too. 

Thanks in advance for any guidance on this. 

Mojisola

OldSmithy said:

My dads estate was below the £325k inheritance tax threshold. 

Unless Mum has enough in her name to push her estate over £1m, IHT won't be an issue.

Deprivation of assets is the thing to be aware of in case she needs care in the future.

RAS

Check out deprivation of assets. If mum has enough to ensure her half covers any home care and care home bills, fine. We were paying £40k p.a for a home ten years ago.

OldSmithy

Thanks both. She certainly won’t be near the £1m and not even half of it unless her half of the house value increases significantly!

I am aware of the deprivation of assets situation. I think this is the bit I need to talk to her about and the family if she insists on moving ahead so that we would equally have a collective responsibility should such a situation arise. 

It’s her money and we would all like to see her using more of it for herself but she insists she really doesn’t want for anything and she’d rather derive enjoyment from sharing. 

OldSmithy

I probably should have said that mum is fit and well with no serious health issues at all. Therefore this is purely about her wanting to share now rather than later, not to avoid care costs at all. My understanding is that there wouldn’t be a deprivation of assets in this scenario but if my reading is incorrect then please do let me know. To be fair she is the youngest of four sisters the eldest being 95 and they are all still living independently and doing quite well so I hope she’s around for a good few years and possibly decades yet!

getmore4less

She certainly won’t be near the £1m and not even half of it unless her half of the house value increases significantly!

If the house was left in a life interest trust then the full value needs to be used for her estate when the time comes.

getmore4less

there is no extra tax if you give away money and die within 7 years it the same tax as if you kept it
(in most cases)

before someone says what about taper relief that only applies to very big gifts. 

OldSmithy

Thanks everyone. I feel better placed to have the conversation now at which I try again to reiterate it’s her money to enjoy but to be honest I don’t think I’ll make that breakthrough!

msb1234

I’ve recently completes a financial assessment with the LA for my stepfather’s care home fees. One of the questions was about any gifts that may have been made in the past 7 years from his accounts. I had to provide 6 month’s worth of bank statements. I was told that the legal team can check the accuracy of my answers - I’m not sure how!