Gifting money to Children

eric4395

Apologies not sure if this is the correct post topic heading  for this question

Can my wife and i gift our 2  adult children £3000 each in a lump sum and also £3000 each from the previous year so ie £6000 each.
Also what are the guidelines is it recognised as in the tax year April 6th to April 5th that you can do this

So if we were to do this before 6th April this year then we could still gift them another £3000 each after April 5th  thus legally giving them £9000 each all within the guidelines of giving money gifts involving possible  inheritance tax.

Keep_pedalling

You can gift your children however much you like, it’s just that your £3000 annual exemption does not have to wait 7 years to fall out of your estate. Anything above that falls under the 7 year rule but that should not put you off making the gift as it cannot increase your IHT liability should you meet an unfortunate early death.

If you did not use your allowances in the last financial year you can still use up that exemption as it can be carried over to the current FY, which would allow you to give £6k each by the 5th April and another £3k each after that date, taking £9k out of your estates with immediate effect. 

eric4395

Keep_pedalling said:

You can gift your children however much you like, it’s just that your £3000 annual exemption does not have to wait 7 years to fall out of your estate. Anything above that falls under the 7 year rule but that should not put you off making the gift as it cannot increase your IHT liability should you meet an unfortunate early death.

If you did not use your allowances in the last financial year you can still use up that exemption as it can be carried over to the current FY, which would allow you to give £6k each by the 5th April and another £3k each after that date, taking £9k out of your estates with immediate effect. 

Ideally I would like to give both them more ie £20,000 each , how would that work if one of us was to pass away within 7 years

Keep_pedalling

Having said that based on one of your previous threads, you are already exceeding your annual exemptions with gifts to grand children, so you should be keeping good records of all these gifts to aid your executors should the worse happen.

Do you have any excess income you could take advantage of to reduce your estates potential IHT liability?

Keep_pedalling

eric4395 said:

Keep_pedalling said:

You can gift your children however much you like, it’s just that your £3000 annual exemption does not have to wait 7 years to fall out of your estate. Anything above that falls under the 7 year rule but that should not put you off making the gift as it cannot increase your IHT liability should you meet an unfortunate early death.

If you did not use your allowances in the last financial year you can still use up that exemption as it can be carried over to the current FY, which would allow you to give £6k each by the 5th April and another £3k each after that date, taking £9k out of your estates with immediate effect. 

Ideally I would like to give both them more ie £20,000 each , how would that work if one of us was to pass away within 7 years

That depends, if between you, you have less than £1M in assets and a house worth at least £350k then it doesn’t matter if you gift or not your estate won’t pay any IHT.

If for example, you have assets of £1.2M and you give away £100k each then if one of you dies within 7 years there will still be no IHT on the first death if you have left everything to the surviving spouse. All that will happen is that £100k of the NRB will be used up so will not be transferable on the second death. The estate of the second to die would then have a total exemption of £900k rather than £1M.

Worst case example, you both die within 7 years so your estate pays the same amount of IHT as if you never made the gifts. This can be mitigated if you are in good health at the time of the gifts by taking out term life insurance to cover IHT in the case of an unfortunate early demise. This is something we have done to cover large one off gifts.

eric4395

Keep_pedalling said:

Having said that based on one of your previous threads, you are already exceeding your annual exemptions with gifts to grand children, so you should be keeping good records of all these gifts to aid your executors should the worse happen.

Do you have any excess income you could take advantage of to reduce your estates potential IHT liability?

Thanks for the replies Keep-pedalling
Yes have taken notes of what we have gifted to family staggered  over  the last 7 years ( approx £50,000)
If we were to give as an example a further £40,000 between our 2 children  that makes £90,000 
The figure of £325,000  threshold  no inheritance tax. X2  = £650,000

Our house is worth approx £140,000
So do we add the £90k to the 14OK
And let's add another 10 k in any other assets we may have totalling 240,000.

650,000 - 240,000 = £410,000

So as long as we have less than that figure in savings  then we wouldn't be involved in inheritance tax
Is that the case or am I still wrong🤔

Also not sure what you mean by

"Do you have any excess income you could take advantage of to reduce your estates potential IHT liability?"

Only actual income we have is our gov state pensions
 + my 6 figure DC pension in Royal London which I haven't touched 
after the feedback I got on here advising me to leave it for the time being and concentrate on spending our savings before thinking of drawdown with my pension 

silvercar

If you have a spouse and gift less than a total of £325k, and the remainder to your spouse, there won't be IHT to pay.

Keep_pedalling

eric4395 said:

Keep_pedalling said:

Having said that based on one of your previous threads, you are already exceeding your annual exemptions with gifts to grand children, so you should be keeping good records of all these gifts to aid your executors should the worse happen.

Do you have any excess income you could take advantage of to reduce your estates potential IHT liability?

Thanks for the replies Keep-pedalling
Yes have taken notes of what we have gifted to family staggered  over  the last 7 years ( approx £50,000)
If we were to give as an example a further £40,000 between our 2 children  that makes £90,000 
The figure of £325,000  threshold  no inheritance tax. X2  = £650,000

Our house is worth approx £140,000
So do we add the £90k to the 14OK
And let's add another 10 k in any other assets we may have totalling 240,000.

650,000 - 240,000 = £410,000

So as long as we have less than that figure in savings  then we wouldn't be involved in inheritance tax
Is that the case or am I still wrong🤔

Also not sure what you mean by

"Do you have any excess income you could take advantage of to reduce your estates potential IHT liability?"

Only actual income we have is our gov state pensions
 + my 6 figure DC pension in Royal London which I haven't touched 
after the feedback I got on here advising me to leave it for the time being and concentrate on spending our savings before thinking of drawdown with my pension 

Not that you need it, but using the residential NRB would actually take you exemptions to £790k as the whole value of the house can be used. 

Ignore the excess income it does not apply here and is not needed anyway. 

Anything in your pension would be exempt from IHT but don’t let that hold you back from using it to give yourselves a bit more luxurious living, especially as you have no IHT liability to start with. 

eric4395

Keep_pedalling said:

eric4395 said:

Keep_pedalling said:

Having said that based on one of your previous threads, you are already exceeding your annual exemptions with gifts to grand children, so you should be keeping good records of all these gifts to aid your executors should the worse happen.

Do you have any excess income you could take advantage of to reduce your estates potential IHT liability?

Thanks for the replies Keep-pedalling
Yes have taken notes of what we have gifted to family staggered  over  the last 7 years ( approx £50,000)
If we were to give as an example a further £40,000 between our 2 children  that makes £90,000 
The figure of £325,000  threshold  no inheritance tax. X2  = £650,000

Our house is worth approx £140,000
So do we add the £90k to the 14OK
And let's add another 10 k in any other assets we may have totalling 240,000.

650,000 - 240,000 = £410,000

So as long as we have less than that figure in savings  then we wouldn't be involved in inheritance tax
Is that the case or am I still wrong🤔

Also not sure what you mean by

"Do you have any excess income you could take advantage of to reduce your estates potential IHT liability?"

Only actual income we have is our gov state pensions
 + my 6 figure DC pension in Royal London which I haven't touched 
after the feedback I got on here advising me to leave it for the time being and concentrate on spending our savings before thinking of drawdown with my pension 

Not that you need it, but using the residential NRB would actually take you exemptions to £790k as the whole value of the house can be used. 

Ignore the excess income it does not apply here and is not needed anyway. 

Anything in your pension would be exempt from IHT but don’t let that hold you back from using it to give yourselves a bit more luxurious living, especially as you have no IHT liability to start with. 

While I don't think my wife and I will ever be near £1,000,000 in assets if we were to gift £40,000 in total  to our 2 children  does the   £3000 X 2 exempt annual  figures automatically come off this and indeed if we haven't gifted anything the year before  then another £3,000 X2 would come off making the total only £28,000..?
If one of us died within the 7 years then it wouldn't involve any inheritance tax is that correct?
If both of us died within 7 years then would IHT be involved or not as we had below £1,000,000  in assets.

Keep_pedalling

eric4395 said:

Keep_pedalling said:

eric4395 said:

Keep_pedalling said:

Having said that based on one of your previous threads, you are already exceeding your annual exemptions with gifts to grand children, so you should be keeping good records of all these gifts to aid your executors should the worse happen.

Do you have any excess income you could take advantage of to reduce your estates potential IHT liability?

Thanks for the replies Keep-pedalling
Yes have taken notes of what we have gifted to family staggered  over  the last 7 years ( approx £50,000)
If we were to give as an example a further £40,000 between our 2 children  that makes £90,000 
The figure of £325,000  threshold  no inheritance tax. X2  = £650,000

Our house is worth approx £140,000
So do we add the £90k to the 14OK
And let's add another 10 k in any other assets we may have totalling 240,000.

650,000 - 240,000 = £410,000

So as long as we have less than that figure in savings  then we wouldn't be involved in inheritance tax
Is that the case or am I still wrong🤔

Also not sure what you mean by

"Do you have any excess income you could take advantage of to reduce your estates potential IHT liability?"

Only actual income we have is our gov state pensions
 + my 6 figure DC pension in Royal London which I haven't touched 
after the feedback I got on here advising me to leave it for the time being and concentrate on spending our savings before thinking of drawdown with my pension 

Not that you need it, but using the residential NRB would actually take you exemptions to £790k as the whole value of the house can be used. 

Ignore the excess income it does not apply here and is not needed anyway. 

Anything in your pension would be exempt from IHT but don’t let that hold you back from using it to give yourselves a bit more luxurious living, especially as you have no IHT liability to start with. 

While I don't think my wife and I will ever be near £1,000,000 in assets if we were to gift £40,000 in total  to our 2 children  does the   £3000 X 2 exempt annual  figures automatically come off this and indeed if we haven't gifted anything the year before  then another £3,000 X2 would come off making the total only £28,000..?
If one of us died within the 7 years then it wouldn't involve any inheritance tax is that correct?
If both of us died within 7 years then would IHT be involved or not as we had below £1,000,000  in assets.

Yes, you can deduct the annual allowances leaving £28k falling under the 7 year rule..

The gift makes no difference to IHT if you both die within 7 years. It sounds like your estates will be too small to to have to pay any anyway.