Inheritance tax & gifts

Deafcon1

If you have gifted a child, grandchild an amount of money in excess of the £3000 tax free limit a year & you then die, does you estate / receiver of the gift pay tax on that gift, if your total estate value falls under your inheritance tax limit & the gift was made less than 7 years before your death?

Mojisola

If your estate (including the money you have gifted in the last seven years) falls under the IHT thresholds, there's no tax to pay by anyone.

Linton

If your total estate plus the non-exempt gifts is under the IHT limit there is no tax to pay.  

Note that the £3K allowance is a total of all gifts in a year, not a per person value.

Deafcon1

Thank you for confirming my thoughts 

uknick

Linton said:

If your total estate plus the non-exempt gifts is under the IHT limit there is no tax to pay.  

Note that the £3K allowance is a total of all gifts in a year, not a per person value.

Plus, you can give up to £250 per year to as many people as you want as long as they were not part of the £3k limit.

And there are other gift limits for weddings which can be combined with the £3k limit.

sherbie28

Do these rules apply just to pensioners or is it any age? My parents are both pensioners and my mum has just received and unexpected inheritance. Having no clue about any of this I’m thinking if their estate was drawn into IHT should I be documenting every payment they make for birthdays and Christmas etc.? For example, they’d usually give grandkids £50 at birthdays, £100 at Christmas (five grandkids so yearly total = £750). So would that count towards the £3000 a year. Then if they give a grandkids’s wife £50 for her birthday and £50 for Christmas would that be counted into the £250 to any number of people? I don’t know if I’m thinking too deeply about it, it’s just there’s always so much in the press about this kind of thing. Can they even treat themselves to things, like a new TV, mobile phone? Do they have to document that sort of spending as well?

Linton

sherbie28 said:

Do these rules apply just to pensioners or is it any age? My parents are both pensioners and my mum has just received and unexpected inheritance. Having no clue about any of this I’m thinking if their estate was drawn into IHT should I be documenting every payment they make for birthdays and Christmas etc.? For example, they’d usually give grandkids £50 at birthdays, £100 at Christmas (five grandkids so yearly total = £750). So would that count towards the £3000 a year. Then if they give a grandkids’s wife £50 for her birthday and £50 for Christmas would that be counted into the £250 to any number of people? I don’t know if I’m thinking too deeply about it, it’s just there’s always so much in the press about this kind of thing. Can they even treat themselves to things, like a new TV, mobile phone? Do they have to document that sort of spending as well?

The rules potentially apply to any gifts within 7 years of death at any age.  But yes the gift allowances would still apply.  Major gifts should be documented to make the executor's job easier. Gift taxation does apply to physical gifts as well as cash but only to gifts to other people (apart from spouses). The whole objective is to stop people making deathbed gifts - ie giving away all their money to avoid tax just before they die.

However bear in mind that gift taxation cannot exceed the IHT that would be due if they simply kept the money.

One other thought - did the donor of your mother's inheritance die less than 2 years ago?  If so a "deed of variation" to the will can be made so that some or all of your mother's inheritance is paid directly to other people without potentially becoming part of her estate.

doodling

Hi,

[ You should really start your own thread rather than hijacking an ancient one, but to answer your question: ]

The rules are to do with inheritance tax so they apply to gifts you make within 7 years of death.  They are nothing to do with age although clearly pensioners are more likely to die within 7 years of making a gift than, for example, 30 year olds.

Note that if your parents are married and own their own home (worth at least £350k) then their estate won't pay any inheritance tax unless they die with more than £1m in assets.

From an inheritance tax point of view, it doesn't matter if your parents spend money on themselves and there is no need to keep a record of that (whatever they buy will still form part of their estate although I accept that a second-hand TV is worth a lot less than a new one) - inheritance tax is all about taxing what is passed on to other people.

If your parents are in receipt of means tested benefits or state funded care then there may be issues if their "unnecessary" spending, or gifting of money is what has reduced their assets to a point where they are entitled to those benefits or that care (known as deliberate deprivation of assets).  That only matters when they are alive though and is nothing to do with inheritance tax.

Keep_pedalling

These small gifts do not use any of your parents annual allowance as they fall under the small gift allowance, which allows you to gift up to £250 to as many people as your wish. 

Most estates are not subject to IHT and your parents can leave £650k tax free and up to £1M if they are home owners.