Inheritance tax on gift from parents before one dies

Tezap

Hello,

My parents (both late 70s) own 2 properties worth £800k and £1m. Sadly my mother has a short life expectancy due to aggressive cancer. They are looking to sell the £800k property and gift £500k split between myself and my sister £250k each.

If the gift occurs while they are both still alive (the payment could be from my father if that makes any difference) would there be any inheritance tax liability on anyone at the point she died please? I guess there would be some long term when my father dies.

Thankyou.

Keep_pedalling

Is the £800k property their current home? If not the first thing to think about is that there will almost certainly be a hefty CGT liability to come out of the proceeds. If your mother leaves her whole estate to your father and he sells that house after inheriting her share any CGT liability will be halved.

There is no tax advantage in your mother making large gifts or leaving part of her estate to her children, so it would be best for the gifts to come 100% from your father.

Tezap

Keep_pedalling said:

Is the £800k property their current home? If not the first thing to think about is that there will almost certainly be a hefty CGT liability to come out of the proceeds. If your mother leaves her whole estate to your father and he sells that house after inheriting her share any CGT liability will be halved.

The £1m house was self-built in the back garden of the £800k house (that's the revised value as less land) they have owned for 40 years. They are still living in the £800k house. The deeds were split at the land registry a 2 years ago before the £1m house was constructed. My dad plans to move into the £1m house and live in it sadly without my mother.

Keep_pedalling said:

There is no tax advantage in your mother making large gifts or leaving part of her estate to her children, so it would be best for the gifts to come 100% from your father.

Thanks so if my father made the gifts even though the funds clearly come from the sale proceeds of a jointly owned asset there would be no inheritance tax issue on my mum's death?

Keep_pedalling

Tezap said:

Keep_pedalling said:

Is the £800k property their current home? If not the first thing to think about is that there will almost certainly be a hefty CGT liability to come out of the proceeds. If your mother leaves her whole estate to your father and he sells that house after inheriting her share any CGT liability will be halved.

The £1m house was self-built in the back garden of the £800k house (that's the revised value as less land) they have owned for 40 years. They are still living in the £800k house. The deeds were split at the land registry a 2 years ago before the £1m house was constructed. My dad plans to move into the £1m house and live in it sadly without my mother.

Keep_pedalling said:

There is no tax advantage in your mother making large gifts or leaving part of her estate to her children, so it would be best for the gifts to come 100% from your father.

Thanks so if my father made the gifts even though the funds clearly come from the sale proceeds of a jointly owned asset there would be no inheritance tax issue on my mum's death?

So capital gains tax is not an issue in this case. 

Yes the gift can be entirely from your father as and it your mother is leaving her entire estate to him non of her NRB exemptions will have been used so can be transferred to his estate, and there will be no IHT on her estate. 

Do you know how the ownership of their current home is arranged, joint tenants or tenants in common?