Gifting advice

goodread

My Mum would like to give my neice and her three kids £250 each as gifts. Normally HMRC would not count £250 as being taxable, but with the kids not having their own bank accounts I think the only realistic way of doing this is to give my neice a cheque for £1000, perhaps with a note to say that the money is to be split four ways. Do people think HMRC would accept a copy of this note as evidence of how the money was distributed, or would they consider it as a single amount given to my neice? 

elsien

Maybe your niece could think about opening up children’s accounts? 

comeandgo

why would HMRC think gifts of that amount would be taxable?  Is your mother likely to have enough of an estate to trigger inheritance tax?

TadleyBaggie

Gifts are NOT seen as taxable income.

goodread

But any gifts in the 7 years before death over the annual £3,000 allowance would have to be declared, surely?  You would still need to be able to value the estate for inheritance tax purposes as part of a probate application. My Mum wants to gift another £2,000 elsewhere so this other £1,000 would potentially use up her allowance this year. 

poseidon1

goodread said:

But any gifts in the 7 years before death over the annual £3,000 allowance would have to be declared, surely?  You would still need to be able to value the estate for inheritance tax purposes as part of a probate application. My Mum wants to gift another £2,000 elsewhere so this other £1,000 would potentially use up her allowance this year. 

I believe in your original post you were referring to the unlimited £250 small gifts  (IHT) exemption - see HMRC link below. 

As evidence that this is an exempt gift to each of the niece and the three children, I would suggest your mum write a short letter to this affect to accompany the cheque to the niece, and retain a copy with her will to make it clear these  were compliant exempt small gifts. 
That should leave your mum's £3000 annual exemption intact for use elsewhere.

Generally, as regards future gifts of substance from your mum, when in doubt she should document what she is gifting to each person and keep an enduring record for future reference by executors.

https://www.gov.uk/inheritance-tax/gifts#:~:text=You can give as many,are exempt from Inheritance Tax.

Alternatively your mum could consider buying 3 lots of good old fashion premium bonds for each child with niece as the nominee on their behalf - see link below. Obviously, mum should check with niece that she would be happy with this arrangement on behalf of  the children until the vesting age for the bonds at age 16.

https://www.nsandi.com/products/premium-bonds#:~:text=Buying for someone else's child,and cash in the Bonds.

goodread

Thanks for your replies everyone - some useful suggestions. 

badmemory

There can be a problem with premium bonds if there is more than one recipient.  So each child is gifted say £250.  All fine so far.  Then one wins a few thousand.  So then two children have £250 each & the third has £5250.  There was a mother on here a couple of years ago with just this situation & it caused some family upset between those children & between the mother & the donor.

BikingBud

badmemory said:

There can be a problem with premium bonds if there is more than one recipient.  So each child is gifted say £250.  All fine so far.  Then one wins a few thousand.  So then two children have £250 each & the third has £5250.  There was a mother on here a couple of years ago with just this situation & it caused some family upset between those children & between the mother & the donor.

Life is full of lessons!

They could of course return the gift if they object to the fact that chance has enabled one of their siblings to "luck in". 

The same envy comes from lottery wins. The ticket holder has won, not all of the family and other leeches that might consider that they should share out their winnings.

What would occur if the siblings took the cash and one decided to by PB or a lottery ticket?

I would like to think there was scope for a magnanimous gesture but nobody should expect or demand.

Willeri

So if £1000 is given to the niece just how would the £750 actually reach her 3 children? Just open kids accounts which is easy to do for them at whatever age and pay their funds in then cannot be queried, simples