IHT on gift

StitchInTime99

Hello, 
A rather elderly relative decided a few years ago to make a number of large gifts (far exceeding the 325,000 exemption). If they were to die soon after making the gifts, who would be responsible for paying the IHT. Would it be the individual recipients - or would the tax be paid out of the estate?
Many thanks for your help.

p00hsticks

The estate, unless there is not enough money left to pay the bill

StitchInTime99

Just to clarify.... (relative died less than 3 years after making the gifts). The gifts were all made in the same week as each other
They were 3 gifts of £100,000 to grandchildren
Another £100,000 to a close friend
and £500,000 to me
So a total of £900,000 with an iht bill of £360,000

The 325,000 exemption is not available as it was fully used up on earlier gifts to others made 5 years before death. 

So, in order to settle the £360,000 tax bill - should the 5 individuals pay or should the estate pay? There is enough money remaining within the estate to pay but just not sure of the correct way to do things.

Olinda99

The estate pays (as part of the process involved in getting probate)

then anything left over is distributed according to the will

Keep_pedalling

What is the value of the remaining estate? Who inherits this? Is the residential NRB available and any transferable NRBs available?

Normally the remaining estate would cover any IHT on the failed PETS but it should not be taken from exempt gifts (charities, political parties or spouses) and it should not come from any bequests covered by the RNRBs. Some gifts might also come with a clause that says they are to be paid free of any IHT. If any of these leaves a shortfall then it should come from the failed PETs that occurred after the NRB was exceeded. 

HMRC don’t care where the money comes from as long as it’s paid, but if some beneficiaries feel they are being unfairly treated by bearing the full tax burden prepare for trouble.

Olinda99

what happens  if, as in this case,  the gifts were made within seven years of death and there was nothing left in the estate or very little left in the estate such that probate wasn't required 

how would HMRC even know there was IHT to be paid?

Hoenir

Olinda99 said:

how would HMRC even know there was IHT to be paid?

Historic evidence of assets held. 

Keep_pedalling

Olinda99 said:

what happens  if, as in this case,  the gifts were made within seven years of death and there was nothing left in the estate or very little left in the estate such that probate wasn't required 

how would HMRC even know there was IHT to be paid?

It is up to the executors to declare the gifts, failing to do so is a serious criminal offence. HMRC have access to our financial records so it would be hard imaging they would not pick up on over £1M being gifted in the previous 7 years. 

Top11

Hmrc wouldn't know, they relying on you to inform them. If you don't and somehow they did a compliance check on you they will fins out and you will have to pay up and it will include penalties.
Trust me you don't want a compliance check.

Taper relief maybe available to you if you exceeded the nrb, but get advice

Keep_pedalling

Top11 said:

Hmrc wouldn't know, they relying on you to inform them. If you don't and somehow they did a compliance check on you they will fins out and you will have to pay up and it will include penalties.
Trust me you don't want a compliance check.

Taper relief maybe available to you if you exceeded the nrb, but get advice

Believe me HMRC would pick this one up, and with the amount involved could involve jail time. 

As the gifts did not exceed the NRB until the more recent gifts were made within the last 3 years taper relief will not kick in. 

Olinda99

well I was thinking for example supposing two or three years ago I sold my house, liquidated all my assets (well over IHT allowance) and gave all the money to say my children. I do not make a will - there is no executor. Let's say for the sake of argument there is a few k in my bank account left over but everything else has gone.

I then die.

If nobody does anything, who gets jail time and why?

in the specific case of the op, the mother has given away substantial amounts over the last few years - what happens if she dies with no will and nothing left in the estate and nobody does anything?