Is this counted as a gift....?

Robbo33

Hi, I'm pretty sure I know the answer to this but wanted to check with some MSEs! Thanks in advance. 

My Dad passed in June 2024. His estate is In August 2019 (so within last 7 years) he gave £60k to my sister's soon-to-be ex-husband, to allow him to pay off the mortgage on the house he shared with my sister. (The house was in his name only). After that, the deal was that the ex would 'sign the house over' (not sure how this happened) to my sister. Done and dusted. 

So, my question is, does that £60k count as a gift? I'm thinking yes. It was not a loan, of any sort. It was given freely, on the understanding that the ex would use it to pay his mortgage off then 'give' the house to my sister. I don't know what, if any paperwork exists relating to this 'deal' - all I know is that it happened, and now my sister owns her house outright.

Dad's estate is worth over £500k so will be liable to pay IHT - the £60k will of course be part of the £500k allowance and mean that we only have £440k allowance left before we enter IHT territory.

Have I got that right...? Any thoughts would be very welcome - many thanks

Brie

I would say it counts as a gift but the whole amount doesn't get included in IHT due to the time elapsed.  

Look at the taper relief noted here....

How Inheritance Tax works: thresholds, rules and allowances: Rules on giving gifts - GOV.UK (www.gov.uk)

Sorry for your loss.

JGB1955

AIUI taper relief only comes into play once in excess of £325k has been gifted.

Brie

JGB1955 said:

AIUI taper relief only comes into play once in excess of £325k has been gifted.

Ah!  Now I've always interpreted (& others too I'm certain) that 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 means that taper relief is only relevant when there is more than £325k in the estate!  As obviously with less there's no IHT.  

Need a tax expert here methinks!!

bobster2

Brie said:

JGB1955 said:

AIUI taper relief only comes into play once in excess of £325k has been gifted.

Ah!  Now I've always interpreted (& others too I'm certain) that 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 means that taper relief is only relevant when there is more than £325k in the estate!  As obviously with less there's no IHT.  

Need a tax expert here methinks!!

Obviously there's no IHT when the entire estate (including gifts) is < £325k. But even when the total estate is much more than this - taper relief still only comes into play when there were > £325k in gifts.

As stated here...

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

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.

Keep_pedalling

Just checking, was your father a widower? 

Sarahspangles

If it wasn’t a gift (to your sister) then presumably it would be treated as a loan.

Keep_pedalling

Sarahspangles said:

If it wasn’t a gift (to your sister) then presumably it would be treated as a loan.

Why do you think that? The gift was actually to her ex, regardless of what was done after that it is still a gift. 

Sarahspangles

Keep_pedalling said:

Sarahspangles said:

If it wasn’t a gift (to your sister) then presumably it would be treated as a loan.

Why do you think that? The gift was actually to her ex, regardless of what was done after that it is still a gift. 

Because the original post refers to a ‘deal’, and it sounds like this was in the context of a divorce settlement.  

Keep_pedalling

Sarahspangles said:

Keep_pedalling said:

Sarahspangles said:

If it wasn’t a gift (to your sister) then presumably it would be treated as a loan.

Why do you think that? The gift was actually to her ex, regardless of what was done after that it is still a gift. 

Because the original post refers to a ‘deal’, and it sounds like this was in the context of a divorce settlement.  

Yes but the deal was between the daughter and her ex, no mention that it had to be paid back to the deceased.

sheramber

Robbo33 said:

Hi, I'm pretty sure I know the answer to this but wanted to check with some MSEs! Thanks in advance. 

My Dad passed in June 2024. His estate is In August 2019 (so within last 7 years) he gave £60k to my sister's soon-to-be ex-husband, to allow him to pay off the mortgage on the house he shared with my sister. (The house was in his name only). After that, the deal was that the ex would 'sign the house over' (not sure how this happened) to my sister. Done and dusted. 

So, my question is, does that £60k count as a gift? I'm thinking yes. It was not a loan, of any sort. It was given freely, on the understanding that the ex would use it to pay his mortgage off then 'give' the house to my sister. I don't know what, if any paperwork exists relating to this 'deal' - all I know is that it happened, and now my sister owns her house outright.

Dad's estate is worth over £500k so will be liable to pay IHT - the £60k will of course be part of the £500k allowance and mean that we only have £440k allowance left before we enter IHT territory.

Have I got that right...? Any thoughts would be very welcome - many thanks

Dad's estate is worth over £500k so will be liable to pay IHT - the £60k will of course be part of the £500k allowance and mean that we only have £440k allowance left before we enter IHT territory.

What do you mean by that?

What £500k allowance?