Inheritance tax on Gift 13 January at 11:30AM in Deaths, funerals & probate 7 replies 481 views

baggins_22

Hi my Dad passed away last year and we went through the probate process which has completed now.

He had a small amount of money in his account and his estate was below IHT

The money he did have in his account was gifted from my grandad (his father) (still alive) 5 years ago.

His father has recently had some health issues and a friend of the family has advised that if he is to pass away within the next 5 years I would need to pay tax on the money my grandad gave to my dad.

I wonder if someone could advise on the validity of this and also what the terminology is called so I can look into this

Thanks 

Dave_5150

Have a look at the "How Inheritance Tax on a gift is paid" section of this GOV.UK page https://www.gov.uk/inheritance-tax/gifts 

Keep_pedalling

As long as the gift was below £325,000, you can ignore 2hat has been said. The gift may still form part of grandfather’s estate if he dies within 7 years of making it, but any IHT that might be due comes out of his estate not from you.

baggins_22

Keep_pedalling said:

As long as the gift was below £325,000, you can ignore 2hat has been said. The gift may still form part of grandfather’s estate if he dies within 7 years of making it, but any IHT that might be due comes out of his estate not from you.

Thanks my uncle will be responsible for my Grandads estate, so sounds like if he is inheriting over 325k (including the gifted amount) then its his responsibility to pay the tax on it, the amount my grandad gave my dad was no where close to that figure, so I don't feel too bad about it  

RAS

It's not really like that. Grandpa's estate pays IHT before anyone gets the money. So, it is possible everyone who gets everything gets a bit less.

But it has no effect on your father's estate. Just if any of his family inherit from grandpa, it may be a bit less.

But grandpa may have a £1m-gifts IHT allowance anyway.

macman

As above. IHT is paid by the estate, not by the recipients.

baggins_22

One thing to note from the government docs  (https://www.gov.uk/inheritance-tax/gifts) -  " Once you’ve given away more than £325,000, anyone who gets a gift from you in those 7 years will have to pay Inheritance Tax on their gift."

When my grandad sold his house he had some accommodation created at one of my family's home to be closer to support. I have no idea how this was arranged, he might have just given them the money for the building work. I also don't know the timeline on if that happened before he gifted my late father his money. Also not clear if this then passes on to us given the money wasn't actually gifted to us and the person that it was gifted is no longer with us (if that makes any sense)

Keep_pedalling

baggins_22 said:

One thing to note from the government docs  (https://www.gov.uk/inheritance-tax/gifts) -  " Once you’ve given away more than £325,000, anyone who gets a gift from you in those 7 years will have to pay Inheritance Tax on their gift."

When my grandad sold his house he had some accommodation created at one of my family's home to be closer to support. I have no idea how this was arranged, he might have just given them the money for the building work. I also don't know the timeline on if that happened before he gifted my late father his money. Also not clear if this then passes on to us given the money wasn't actually gifted to us and the person that it was gifted is no longer with us (if that makes any sense)

In practice it does not usually work like that, unless someone has give so much away that there are insufficient assets to pay the IHT, the tax comes out of the residual estate.