IHT on gift

Keep_pedalling

Olinda99 said:

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?

You really need to start a new thread, this does not help the OP in any way.

StitchInTime99

Keep_pedalling said:

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.

Hi,
Unfortunately (or I guess fortunately) the residential NRB does not apply as the estate too large and it tapers to nil.
There is a house, large sums of cash and various other bits and pieces. 
I believe this was left to spouse. However, I am not certain if this is directly left to spouse as my relative kept saying it is for (you and your sister) with spouse having a life interest. What should I look for in the will that would clarify this?

The will says:

Absolute residuary gift to spouse
My executors shall hold my estate for my wife ***** absolutely if she shall survive me 

Keep_pedalling

That sounds like it has been left to her absolutely with no life interest trust. This would make his remaining estate exempt from IHT as it is covered by spousal exemption. Even if it had been left in an immediate post death interest trust his widow would still have been the beneficial owner and it would be covered by spousal exemption.

I believe therefore that IHT due on those gifts needs to come from the recipients of the gifts. It may be possible the his widow could agree that it is paid from her inheritance instead, but I think that would be classed as a gift and subject to the 7 year rule for her own estate.

Considering the amount involved and the rather unusual situation the executors should take professional advice as few on here (including me)  will have been in this situation and are not qualified to provide advice.

StitchInTime99

Keep_pedalling said:

That sounds like it has been left to her absolutely with no life interest trust. This would make his remaining estate exempt from IHT as it is covered by spousal exemption. Even if it had been left in an immediate post death interest trust his widow would still have been the beneficial owner and it would be covered by spousal exemption.

I believe therefore that IHT due on those gifts needs to come from the recipients of the gifts. It may be possible the his widow could agree that it is paid from her inheritance instead, but I think that would be classed as a gift and subject to the 7 year rule for her own estate.

Considering the amount involved and the rather unusual situation the executors should take professional advice as few on here (including me)  will have been in this situation and are not qualified to provide advice.

Thank you keep-pedalling

I think spouse is more than happy to settle the tax.

So if it became a 'gift' from them (owing to age it is unlikely that PET would succeed). But in that case, the tax would then be paid out of their estate on the gift.
Of which me and my sister are the only two beneficiaries of that estate anyway. So with that being the case, ultimately me and my sister could then cover the grandchildren's (and other people's) tax out of our beneficial entitlement to the spouse's estate.

Hummm I think that is what you meant - I might be misunderstanding - but will look into this and take advice  

Top11

Keep_pedalling said:

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. 

Yes you are Right, I had to read over again the amount of value involved. Plus the fact there's nothing left in the estate would warrant a closer look.

I had a instance back in 2011, I gifted a half share of house back to a sibling. In a compliance check 9 years after on another property they picked up on the gift I made back to sibling in 2011. A quick check by hmrc and they can pick up on alot of things, especially if it involves property transfer. 

bobster2

Keep_pedalling said:

I believe therefore that IHT due on those gifts needs to come from the recipients of the gifts. It may be possible the his widow could agree that it is paid from her inheritance instead, but I think that would be classed as a gift and subject to the 7 year rule for her own estate.

Yes.

https://www.gov.uk/inheritance-tax/gifts

How Inheritance Tax on a gift is paid
Any Inheritance Tax due on gifts is usually paid by the estate, unless you give away more than £325,000 in gifts in the 7 years before your death. Once you’ve given away more than £325,000, anyone who gets a gift from you in those 7 years will have to pay Inheritance Tax on their gift.