Giving money to siblings without tax implications

XzavierWalnut

Marcon said:

XzavierWalnut said:

Apologies if this has already been answered but I cannot find a definitive answer on here or online.
Am I allowed to give my siblings more than £3000 between them each financial year without IHT complications?
I am 60 years old so hopefully will last at least another 7 years, married ,and our estate is worth more than £1m.

It's not really that complicated, but you do need to keep records of how much you give them to help your executors should you die before 7 years has elapsed.

They are my executors. I'm still confused. I know about the 7 years, but others on this post have stated that it does not matter, example relaxtwotribes comment

XzavierWalnut

Found this on gov.uk. I understand the surplus income comment now. But states has to be regular payments but does not say how much.

Gifts from your surplus income

If you have enough income to maintain your usual standard of living, you can make gifts from your surplus income. For example, regularly paying into your child’s savings account, or paying a life insurance premium for your spouse or civil partner.

To make use of this exemption, it’s very important that you keep very good records of these gifts. Otherwise, Inheritance Tax might be due on these gifts when you die.

Keep_pedalling

XzavierWalnut said:

Found this on gov.uk. I understand the surplus income comment now. But states has to be regular payments but does not say how much.

Gifts from your surplus income

If you have enough income to maintain your usual standard of living, you can make gifts from your surplus income. For example, regularly paying into your child’s savings account, or paying a life insurance premium for your spouse or civil partner.

To make use of this exemption, it’s very important that you keep very good records of these gifts. Otherwise, Inheritance Tax might be due on these gifts when you die.

As you are currently using some of your savings to live off then you don’t have any excess income to gift 

An estate of £1M sounds a lot but you are still quite young so it may have to get you through 30 years or more. How much of this £1M is tied up in your home? 

Flugelhorn

XzavierWalnut said:

relaxtwotribes said:

Only with one of two provisos applying.  One, that you survive for 7 years. Or two, that you gift the surplus above £3k out of surplus income and as one of a regular series of gifts.
You have a £3k annual gifting allowance, as does your wife, making a total of £6k (subject to her not gifting elsewhere).

Thank you for the info. I don't understand "above £3k out of surplus income"
for clarification the total sum is just under £30k. I don't really have any income as I retired @ 59 and living off investments and excess cash.

The "out of surplus income" bit is where you can give people money regularly out of excess income ie not touching capital and not impacting your current lifestyle - this is allowed without ultimate IHT on the amounts 

eg I give my kids money monthly that is purely out of excess income but is well in excess of the 3K a year - I keep a spreadsheet which shows the incomings and outgoings and their gifts are included in that and demonstrably from the excess

In your case, it is possible that if you gave the gifts out of income from the investments it would be OK but not from excess cash - though am sure someone will  clarify that point 

Keep_pedalling

XzavierWalnut said:

Marcon said:

XzavierWalnut said:

Apologies if this has already been answered but I cannot find a definitive answer on here or online.
Am I allowed to give my siblings more than £3000 between them each financial year without IHT complications?
I am 60 years old so hopefully will last at least another 7 years, married ,and our estate is worth more than £1m.

It's not really that complicated, but you do need to keep records of how much you give them to help your executors should you die before 7 years has elapsed.

They are my executors. I'm still confused. I know about the 7 years, but others on this post have stated that it does not matter, example relaxtwotribes comment

I don’t think that is what they meant. You don’t have excess income so you don’t have to bother about gifting from excess income, any non-exempt gifts you make to siblings will fall under the 7 year rule.

Even though the people receiving your gifts are also your executors you still need to keep gifting records in case they are no longer able to act as executors when the time comes. Does your will factor in the chance that you may outlive your siblings both for who inherits if you are the last and who becomes executor?

XzavierWalnut

Keep_pedalling said:

XzavierWalnut said:

Marcon said:

XzavierWalnut said:

Apologies if this has already been answered but I cannot find a definitive answer on here or online.
Am I allowed to give my siblings more than £3000 between them each financial year without IHT complications?
I am 60 years old so hopefully will last at least another 7 years, married ,and our estate is worth more than £1m.

It's not really that complicated, but you do need to keep records of how much you give them to help your executors should you die before 7 years has elapsed.

They are my executors. I'm still confused. I know about the 7 years, but others on this post have stated that it does not matter, example relaxtwotribes comment

I don’t think that is what they meant. You don’t have excess income so you don’t have to bother about gifting from excess income, any non-exempt gifts you make to siblings will fall under the 7 year rule.

Even though the people receiving your gifts are also your executors you still need to keep gifting records in case they are no longer able to act as executors when the time comes. Does your will factor in the chance that you may outlive your siblings both for who inherits if you are the last and who becomes executor?

To clarify, now I am understanding this better, it is not excess income, it is excess savings which account for 90% of my estate. 

relaxtwotribes

relaxtwotribes said:

XzavierWalnut said:. I don't understand "above £3k out of surplus income"

for clarification the total sum is just under £30k. I don't really have any income as I retired @ 59 and living off investments and excess cash.

In which case you don’t need to concern yourself.

Sorry if I wasn’t clear; my comment was purely relating to yours about surplus income in which you stated not having any income, therefore not having any surplus income.  

Keep_pedalling

XzavierWalnut said:

Keep_pedalling said:

XzavierWalnut said:

Marcon said:

XzavierWalnut said:

Apologies if this has already been answered but I cannot find a definitive answer on here or online.
Am I allowed to give my siblings more than £3000 between them each financial year without IHT complications?
I am 60 years old so hopefully will last at least another 7 years, married ,and our estate is worth more than £1m.

It's not really that complicated, but you do need to keep records of how much you give them to help your executors should you die before 7 years has elapsed.

They are my executors. I'm still confused. I know about the 7 years, but others on this post have stated that it does not matter, example relaxtwotribes comment

I don’t think that is what they meant. You don’t have excess income so you don’t have to bother about gifting from excess income, any non-exempt gifts you make to siblings will fall under the 7 year rule.

Even though the people receiving your gifts are also your executors you still need to keep gifting records in case they are no longer able to act as executors when the time comes. Does your will factor in the chance that you may outlive your siblings both for who inherits if you are the last and who becomes executor?

To clarify, now I am understanding this better, it is not excess income, it is excess savings which account for 90% of my estate. 

There is not really such a thing as excess savings, as none of us really know what we might need to see us through our dotage. The rules on excess income are in place to prevent your assets growing and continually growing your potential IHT liability. If for example you have income of £50k pa, but your expenditure is only £40k you can prevent that spare £10k adding to your capital by gifting it instead.

For this to be successful you need to keep not only records of your gifts but also of your income expenditure. 

We are in a similar position we gift over our annual allowance on a regular basis but we are also drawing on our savings to maintain our lifestyle so can’t claim gifts from excess income. 

Olinda99

it's really is very simple - you can give your siblings as much as you want now with no tax implications other than the fact that if you die within seven years the gift will become part of your IHT allowance. if you survive 7 years then it drops out.

XzavierWalnut

Thanks for all the comments. At least I understand how it all works. Whether I agree with the rules is another matter.