Giufting £3K to children

Ca1vados

Understand each parent can gift £3k in a tax year, plus one roll over from previous year if it has not been used.
Must this be a cash transfer?
Can it be an I O U?
Can it be a slice of equity in land or property?

Flugelhorn

This is looking at gifts allowed under  IHT in the 7 years prior to death, if you estate is liable to IHT 

You can give your kids what you like, just if IHT is payable then the estate will have to pay it on the gifts.

Was going to mention gifts out of excess income (I give my kids way in excess of 3K through this route) but if you are looking at IOUs then it is unlikely to be excess income

p00hsticks

you can gift as much or as little as you wish - the £3k is only in relation to the potential avoidance of IHT if the donor dies within 7 years of making the gift. Is IHT likely to be a concern in your case ?

born_again

Just be careful this does not fall into deprivation of assets, if you are looking to do it in relation to getting older & a way to avoid care fee's.

Exodi

Ca1vados said:

Understand each parent can gift £3k in a tax year, plus one roll over from previous year if it has not been used.
Must this be a cash transfer?
Can it be an I O U?
Can it be a slice of equity in land or property?

On the last option, I think it isn't that desirable to have a slice of equity in someone elses property as it can cause people to lose FTB status, or have to pay higher rates of stamp duty.

I'm not sure on the IOU, isn't that effectively what a will is for? Unless you mean as a way to 'cash in' each years gifting allowances without needing to physically hand over any money or assets, so one year in the future you can give them a large wodge of cash as a gift comprised of all the 'cashed in years' you gave them an IOU. I suspect there is no formal allowance for such a thing and if there was it would probably be exploited to the hills and back.

Grumpy_chap

Ca1vados said:

Understand each parent can gift £3k in a tax year, plus one roll over from previous year if it has not been used.
Must this be a cash transfer?
Can it be an I O U?
Can it be a slice of equity in land or property?

What is the objective here?

With regard to the IOU, does this suggestion mean you do not have the £3k available to gift?
If so, how will this be considered in the event that you need care home?
Have you considered the rules around DoA (deprivation of assets)?

With regard to the partial equity in land or property:

• What property is this?  
• Is this your family home?
• Will you continue to live there?  (Or, if not the family home, continue to benefit from the use of the partial equity transferred?)  
• Have you considered the rules for GWR (gifts with reservation)?
• Will you pay market rent for the use of that equity?
• Will this impact the children with their first time buyer status (if appropriate)?
• Will the children suffer higher rate stamp duty for buying a home because of this partial equity in a property?
• What future CGT liability have you calculated for as and when that property is divested?
• How much value is the partial equity of the property?
• How can the children realise the value of the partial equity of the property?
• Are the children now, or ever going to be, in need of means-tested benefits?  
• If they have a partial share of a property, that value will be counted as savings and may impact entitlement to UC.
• How will the partial share of the property be resolved in the event of one of the children divorcing?  Will an ex-spouse expect part of the property?  Or force a sale?

If the objective is to avoid IHT, then this might fail on that ground but also create liabilities for additional taxes that would not otherwise arise, plus the complexities around benefits / divorce.

If the objective is to avoid IHT, will your Estate be liable for IHT in the first place?

eric4395

born_again said:

Just be careful this does not fall into deprivation of assets, if you are looking to do it in relation to getting older & a way to avoid care fee's.

How is this judged. Deprivation of assets
If you give a lump sum to your family and you have no known health issues at that time can they judge it deprivation then.?
So in other words any gift above the guidelines could always be said too be deprivation?. Is this the case?

Keep_pedalling

eric4395 said:

born_again said:

Just be careful this does not fall into deprivation of assets, if you are looking to do it in relation to getting older & a way to avoid care fee's.

How is this judged. Deprivation of assets
If you give a lump sum to your family and you have no known health issues at that time can they judge it deprivation then.?
So in other words any gift above the guidelines could always be said too be deprivation?. Is this the case?

No it’s not, we have made some very large gifts in the last few years, but we still have not deprived ourselves because we have kept sufficient assets to be able to fund anything we may need in our old age. You could just give £3000 away and it could be considered as deprivation of assets for claiming means tested benefit if that gift got your savings below £16k, or you could give £250k away with no risk because you still have £500k of assets for your own use.