Iht and gift of cash 9 March at 1:52PM in Deaths, funerals & probate 5 replies 331 views

V2001

Have a question in this scenario

Daughter gives mother 40k cash in 2020
Mother uses that 40k gift to purchase a house for 650k. The rest of the 610k cash came from mother's savings and a previous house she sold.

Daughter moves in with mother in 2020 to new property.
Mother dies in 2022 , is there any tax implications because of the 40k given to mother , which daughter also benefits from by living in the house?

Keep_pedalling

If the mother’s marital status was single or divorced then the £40k gift would form part of her estate and as the estate is over £500k then will add £10k of IHT to the estate. If she is a widow then her estate could have exemptions up to £1M so may not matter so much. The gift is also still part of the daughters estate so if she dies within 7 years could be subject to IHT x 3.

If this is a real case then the £40 would be better given as a loan, or the two of them should be joint owners.

V2001

The property was in mother's sole name and she was a widow. So should it just be left at that and not need to be declared anywhere about the 40k?
Obviously daughter who made the gift of 40k is still alive 

Linton

The fact that it was a gift would not be declared in any documentation for the mother's estate. OK one exception - if the mother's executors were claiming she was making large gifts from income, then the gift could be categorised as income.

It may need to be declared when the daughter dies.

getmore4less

Keep_pedalling said:

If the mother’s marital status was single or divorced then the £40k gift would form part of her estate and as the estate is over £500k then will add £10k of IHT to the estate. If she is a widow then her estate could have exemptions up to £1M so may not matter so much. The gift is also still part of the daughters estate so if she dies within 7 years could be subject to IHT x 3.

If this is a real case then the £40 would be better given as a loan, or the two of them should be joint owners.

The £40k has been spent  no longer part of the estate as cash.

Keep_pedalling

getmore4less said:

Keep_pedalling said:

If the mother’s marital status was single or divorced then the £40k gift would form part of her estate and as the estate is over £500k then will add £10k of IHT to the estate. If she is a widow then her estate could have exemptions up to £1M so may not matter so much. The gift is also still part of the daughters estate so if she dies within 7 years could be subject to IHT x 3.

If this is a real case then the £40 would be better given as a loan, or the two of them should be joint owners.

The £40k has been spent  no longer part of the estate as cash.

But it was spent on a house so has not left the estate, just the form has changed.