Giving / loans money to children

RichDav

Not sure if this is under the right title!  We are due an inheritance from Canada, we are planning to give a substantial amount to each of our two children (adults!).  I am aware that if we were to die before the 7 year rule is out, they would have to pay tax.  If we treat it as a loan, they pay back small amount each month, does the 7 year rule still apply?  Hopefully someone can help!
Many thanks.

MorningcoffeeIV

If you die within 7 years, they don't pay tax. Your estate is treated as still having the funds and taxed on it.

If you give them a loan, then they would repay your estate.

Brie

Could you request an alteration to the will so the money goes directly to the kids??

Slinky

If you don't intend for any of the money to be given back to you, is there a Canadian equivalent of the Deed of Variation which you could have used here within 2 years of death?

Keep_pedalling

Your best bet would be to gift using a deed of variation which effectively passes some or all of your inheritance to your children without it ever hitting your estate. This most be done within 2 years of the death of the testator, it does not need a solicitor to do it and once done you should keep a copy with your will.

https://www.gov.uk/alter-a-will-after-a-death

[Deleted User]

RichDav said:

Not sure if this is under the right title!  We are due an inheritance from Canada, we are planning to give a substantial amount to each of our two children (adults!).  I am aware that if we were to die before the 7 year rule is out, they would have to pay tax.  If we treat it as a loan, they pay back small amount each month, does the 7 year rule still apply?  Hopefully someone can help!
Many thanks.

Is your estate over £1 million in value (including property) as a married couple or £650k with no property? If it isn’t you have nothing to worry about. 

Grumpy_chap

RichDav said:

Not sure if this is under the right title!  We are due an inheritance from Canada, we are planning to give a substantial amount to each of our two children (adults!).  I am aware that if we were to die before the 7 year rule is out, they would have to pay tax.  If we treat it as a loan, they pay back small amount each month, does the 7 year rule still apply?  Hopefully someone can help!
Many thanks.

Assuming that you Estate would fall within IHT:
1. As others have suggested, DoV means the inheritance is never part of your Estate so would be the best route if it is possible.
2. If you gift the amount to your children, your Estate can not be liable for more IHT than if you keep all the money.
3. If you lend the money to your children, then all the value remains within your Estate and subject to IHT.

I assume, also, that you have sufficient other resources that DoA (deprivation of assets) with regard to any possible care costs is not a matter that needs to be considered.