When does a gift happen for IHT purposes?

Kirkmain

At what time does the 7year countdown for IHT liability start ticking. Cash gifted for property deposit. Yes estate is large enough for IHT to be payable.

When the gifter verbally agrees to gift the cash? [obviously no formal proof]
When the declaration of gift is signed?
When contracts were exchanged on the property that the gift was being used to purchase
When money was transferred [ie. in this case date of completion of property]

bobster2

Not an expert - but I would think that for a one-off gift of money (cash) the gift date is the date that the funds were transferred to the recipient of the gift.

However, it may be more complicated for trusts, property and where there are multiple gifts over time.

Smudgeismydog

Agree with bobster2, I would think it is when it represents a reduction to the estate

Sea_Shell

Kirkmain said:

At what time does the 7year countdown for IHT liability start ticking. Cash gifted for property deposit. Yes estate is large enough for IHT to be payable.

When the gifter verbally agrees to gift the cash? [obviously no formal proof]
When the declaration of gift is signed?
When contracts were exchanged on the property that the gift was being used to purchase
When money was transferred [ie. in this case date of completion of property]

It won't be that!!!   Everyone would just say they verbally promised the gift 7 years ago 😉

I'd agree with the others, it's the date the cash was transferred and left their account.

Grumpy_chap

I can't see how this can be anything other than the date the gift was made / money transferred.

Otherwise, everyone on their death bed would simply make the gift that they promised "seven years plus one day" previously.

Murdina

What the law says is that a transfer of value (which is what you are accounting for) occurs when the value of your "estate" immediately after the "disposition" is less than it was before. So for a cash gift that is going to be the date on which you make the cash gift. The outgoing cash diminishes your "estate". 

Keep_pedalling

100% when the money is transferred, which is why you should do it at the earliest opportunity. 

theoretica

There is a special case for when someone makes a gift, but keeps it in their possession (like cash in the bank but the transfer not made yet) - a 'gift with reservation' which as I understand it does not count for IHT purposes.

ProbateNewbie

Grumpy_chap said:

I can't see how this can be anything other than the date the gift was made / money transferred.

Otherwise, everyone on their death bed would simply make the gift that they promised "seven years plus one day" previously.

I know of someone who died literally 7yrs and 1 day after making a gift of money to one of their adult children.

There was no IHT to pay anyway (& wouldn't  have been, even if the money had stayed in the estate), so was academic but wow, 7yrs & 1 day...! 

Brie

Don't forget that the amount of the gift gets tapered during the 7 years so affects things less over time.

From the gov.uk website...

Taper relief only applies if the total value of gifts made in the 7 years before you die is over the £325,000 tax-free threshold.

Taper relief

Years between gift and death	Rate of tax on the gift
3 to 4 years	32%
4 to 5 years	24%
5 to 6 years	16%
6 to 7 years	8%
7 or more	0%

bobster2

Brie said:

Don't forget that the amount of the gift gets tapered during the 7 years so affects things less over time.

From the gov.uk website...

Taper relief only applies if the total value of gifts made in the 7 years before you die is over the £325,000 tax-free threshold.

Taper relief

Years between gift and death	Rate of tax on the gift
3 to 4 years	32%
4 to 5 years	24%
5 to 6 years	16%
6 to 7 years	8%
7 or more	0%

It's not the gift that gets tapered - it's the tax rate. And as stated there - the taper is only relevant if the total in gifts uses up the NRB (i.e. > £325,000).