Gifted money

MrsEd

My mum has kindly gifted me a large sum of money. She's wanting to help me pay my mortgage off sooner as it was due to run until retirement age but I'll health has put doubts over whether I can work that long. 

My Dad died last year so Mum's had a lot of money come in. 

I'm now worrying about this though. 

I know that the estate can regard this money as part of the pot if Mum dies within 7 years but I was reading that it's actually HMRC that would tax me directly. I just thought it went back into the estate but it sounds more concerning than that. 

What would happen? My mum will leave her estate to me and my sibling and there will be a house plus a fair bit of money (in theory...one never knows if she needs future care of course). 

I'm just concerned about putting this money on the mortgage and then having a bill from HMRC as I don't have much of my own money to find a large amount from. 

Would it come out of my whole inheritance tax bill so you inherit minus money owed in tax ? How does it work?

I'm feeling anxious about everything just now as I'm not well. 

Can I accept this gift and use it on my mortgage as mum wishes?

km1500

if you accept the gifts now then as you say it will become part of the pot if your mother does not live seven years 

in due course when your mother dies the executor will calculate the inheritance tax due and pay it out of the estate before distributing the remainder to beneficiaries

in short it is your mum's estate that pays the inheritance tax, not you 

the only proviso is that if there is not enough money in the estate and inheritance tax is due they could go after people who have received money within the last seven years.

RAS

And if mum died in 5 years time, the IHT on the gift would be a lot less than 40%.

So if she has enough assets for her executors to pay the IHT on her estate, you pay nothing, otherwise you pay a smaller amount.

Marcon

MrsEd said:

My mum has kindly gifted me a large sum of money. She's wanting to help me pay my mortgage off sooner as it was due to run until retirement age but I'll health has put doubts over whether I can work that long. 

My Dad died last year so Mum's had a lot of money come in. 

I'm now worrying about this though. 

I know that the estate can regard this money as part of the pot if Mum dies within 7 years but I was reading that it's actually HMRC that would tax me directly. I just thought it went back into the estate but it sounds more concerning than that. 

What would happen? My mum will leave her estate to me and my sibling and there will be a house plus a fair bit of money (in theory...one never knows if she needs future care of course). 

I'm just concerned about putting this money on the mortgage and then having a bill from HMRC as I don't have much of my own money to find a large amount from. 

Would it come out of my whole inheritance tax bill so you inherit minus money owed in tax ? How does it work?

I'm feeling anxious about everything just now as I'm not well. 

Can I accept this gift and use it on my mortgage as mum wishes?

That old chestnut...it depends:

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.

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

Keep_pedalling

The worse that can happen is that her estate pays the same amount of IHT as it would have done if she never made the gift . If the amount is below £325k then her estate is responsible for paying all the IHT not the receiver of the gift.

Keep_pedalling

RAS said:

And if mum died in 5 years time, the IHT on the gift would be a lot less than 40%.

So if she has enough assets for her executors to pay the IHT on her estate, you pay nothing, otherwise you pay a smaller amount.

Taper relief only apply to gifts over £325k.