Clarification of Advice on Government website.

clarzier

Can someone clarify some information on the government website with regard to £250 small gift rules.
We have recently come into a small amount of inheritance (approx 40k) which is to be split between two people.
We presumed that we could send the money in batches of up to £250 but we may have mis understood the advice given as to unlimited amounts of £250 to be given per person. The £3k allowance has not been used either.
What is the best way to distribute the inheritance? As the amount been given is small and the financial circumstances of the person giving it away (cash in bank in excess of £300k, property in excess of £160k, monthly income approx £2k, the person giving the gift is in their late 80s ) what is the best way to distribute it?
Thanks in advance for any advice given.

Daniel54

If I understand correctly, you have recently received an inheritance of approx £40k which you now wish to pass on to two other people.But I am confused when you say the the person wishing to gift the inheritance is in their late 80s,so not  you ?

So long as the original inheritance is within 2 years of the date of death, then I would suggest a deed of variation is probably the optimal way to go ,but the original scenario is not clear from your OP.

Unlimited batches of £250 do not circumvent the annual £3k limit.But from what you have said, it is entirely possible that the estate of the gifter may not be subject to IHT when the time comes, but more information needed.

Keep_pedalling

A deed of variation is the simplest way of avoiding an inheritance being added to your estate.

Is this elderly person a widow or widower and if so did they inherit their spouse’s estate?

clarzier

Apologies for not making myself clear as I am trying to get our situation across but it's not making much sense. I am sorting the heritance on behalf of a close relative who wishes to give his 2 children a lump sum of approx 20k each from their mother's substantial estate with a view of him keeping the rest.

As I have never dealt with it before im unsure of how to do this properly. I read the gov.uk website and I thought that it read that you can give unlimited gifts to individuals of less than £250 but tonight it's been queried that this isn't correct.  Looking at the rules I feel they could be read two different ways.

clarzier

Keep_pedalling said:

A deed of variation is the simplest way of avoiding an inheritance being added to your estate.

Is this elderly person a widow or widower and if so did they inherit their spouse’s estate?

Yes they are elderly and they inherited their spouses estate which was a substantial amount (in excess of 100k) and he wants to give his 2 sons approx 20k each from the estate.

Keep_pedalling

You are definitely confused about the £250 small gifts thing. It is one gift per person per year to as many people as you like, as long as those people have not received other gifts from you.

So for example we gift our children our £3000 annual exemption each year, their spouses get £250 from each of us and we top up our grandchildren’s JISAs by the same amount.

clarzier

So what is the best way to sort it out?

Daniel54

A deed of variation alters the original will so the the £40k bypasses the estate of the original inheritor and can be passed directly to his sons.This completely avoids any question of gifting.It must be done however within two years of the original date of death.
https://www.gov.uk/alter-a-will-after-a-death

Keep_pedalling

clarzier said:

Keep_pedalling said:

A deed of variation is the simplest way of avoiding an inheritance being added to your estate.

Is this elderly person a widow or widower and if so did they inherit their spouse’s estate?

Yes they are elderly and they inherited their spouses estate which was a substantial amount (in excess of 100k) and he wants to give his 2 sons approx 20k each from the estate.

In which case they are no where near IHT territory so they can simply gift the money. 

clarzier

Daniel54 said:

A deed of variation alters the original will so the the £40k bypasses the estate of the original inheritor and can be passed directly to his sons.This completely avoids any question of gifting.It must be done however within two years of the original date of death.
https://www.gov.uk/alter-a-will-after-a-death

Probate has already been done and all accounts closed and sorted. Original Will has been retained by probat3

Daniel54

Granting of probate does not hinder a deed of variation - the only constraint is the two year gap from date of death

However as Keep Pedalling has said, from the information provided his estate will fall well below IHT territory after the allowances of approx £800k ,so gifting £40k now will in any case not give rise to any potential IHT liabilities.