Transfer of inheritance tax allowance to spouse

Mr._H_2

Let's say I give some monetary gifts to my siblings, and then die within 7 years of giving those gifts. I am survived by my wife, and in my will, everything is left to her.

Can the executor elect for my estate to pass 100% of the tax-free allowance to my wife, and pay any outstanding inheritance tax on the gifts given to my siblings (e.g. 16% if I die after 5 years)?

Keep_pedalling

No, there would be no inheritance tax to pay on those gifts unless you gifted more than £325k. Your wife’s estate would only be able to claim any unused portion of your NRB. Also there is no taper relief on gifts below £325k 

Albermarle

Mr._H_2 said:

Let's say I give some monetary gifts to my siblings, and then die within 7 years of giving those gifts. I am survived by my wife, and in my will, everything is left to her.

Can the executor elect for my estate to pass 100% of the tax-free allowance to my wife, and pay any outstanding inheritance tax on the gifts given to my siblings (e.g. 16% if I die after 5 years)?

As said you can not do it anyway, but just regarding your comment in bold.
It is widely thought, even by some media commentators, that the taper on gifts applies to all gifts. However this is mistaken.
The taper only applies where the gift is very large ( > £325K) and where in theory at least the beneficiary may have to pay any IHT due.
'Normal size ' gifts will be counted back into your estate 100% if you die within 7 years.

Mr._H_2

Albermarle said:

Mr._H_2 said:

Let's say I give some monetary gifts to my siblings, and then die within 7 years of giving those gifts. I am survived by my wife, and in my will, everything is left to her.

Can the executor elect for my estate to pass 100% of the tax-free allowance to my wife, and pay any outstanding inheritance tax on the gifts given to my siblings (e.g. 16% if I die after 5 years)?

As said you can not do it anyway, but just regarding your comment in bold.
It is widely thought, even by some media commentators, that the taper on gifts applies to all gifts. However this is mistaken.
The taper only applies where the gift is very large ( > £325K) and where in theory at least the beneficiary may have to pay any IHT due.
'Normal size ' gifts will be counted back into your estate 100% if you die within 7 years.

So, if someone's total estate (excluding gifts given in the last 7 years) is valued at e.g. £1.2 million, and they gave three individual gifts of £100k each over the last 7 years, then none of the gifts would get taper relief?

Jeremy535897

Mr._H_2 said:

Albermarle said:

Mr._H_2 said:

Let's say I give some monetary gifts to my siblings, and then die within 7 years of giving those gifts. I am survived by my wife, and in my will, everything is left to her.

Can the executor elect for my estate to pass 100% of the tax-free allowance to my wife, and pay any outstanding inheritance tax on the gifts given to my siblings (e.g. 16% if I die after 5 years)?

As said you can not do it anyway, but just regarding your comment in bold.
It is widely thought, even by some media commentators, that the taper on gifts applies to all gifts. However this is mistaken.
The taper only applies where the gift is very large ( > £325K) and where in theory at least the beneficiary may have to pay any IHT due.
'Normal size ' gifts will be counted back into your estate 100% if you die within 7 years.

So, if someone's total estate (excluding gifts given in the last 7 years) is valued at e.g. £1.2 million, and they gave three individual gifts of £100k each over the last 7 years, then none of the gifts would get taper relief?

That is true. It is a common misconception that taper relief is available.
Consider this example. Spouse 1 makes gifts of £325,000 to children 6 years and 11 months before death. Survivor has nil rate band of £325,000 only (ignoring RNRB) because no NRB is available from spouse 1. No tax is saved.
Now consider the position where spouse 1 leaves £325,000 to children in the will. Again the survivor has a NRB of £325,000 only. No tax is saved.
Now consider a situation where spouse 1's will leaves everything to spouse 2, or is varied to leave everything to spouse 2, but a day later spouse 2 gives children £325,000. If spouse 2 lives for seven years, spouse 2's estate gets a NRB of £650,000.

Keep_pedalling

Mr._H_2 said:

Albermarle said:

Mr._H_2 said:

Let's say I give some monetary gifts to my siblings, and then die within 7 years of giving those gifts. I am survived by my wife, and in my will, everything is left to her.

Can the executor elect for my estate to pass 100% of the tax-free allowance to my wife, and pay any outstanding inheritance tax on the gifts given to my siblings (e.g. 16% if I die after 5 years)?

As said you can not do it anyway, but just regarding your comment in bold.
It is widely thought, even by some media commentators, that the taper on gifts applies to all gifts. However this is mistaken.
The taper only applies where the gift is very large ( > £325K) and where in theory at least the beneficiary may have to pay any IHT due.
'Normal size ' gifts will be counted back into your estate 100% if you die within 7 years.

So, if someone's total estate (excluding gifts given in the last 7 years) is valued at e.g. £1.2 million, and they gave three individual gifts of £100k each over the last 7 years, then none of the gifts would get taper relief?

Correct, but if they had given a 4 gifts of £100k, £75k of the fourth gift would be.

lisyloo

Is a simple solution to get a term (7 year) life insurance for the tax?

Albermarle

lisyloo said:

Is a simple solution to get a term (7 year) life insurance for the tax?

Even simpler is just to pay it.
As someone said there are only two things certain in life, death and tax.
IHT neatly combines the two.