Inheritance tax question

BoxerfanUK

My father (age 92) wants to gift my daughter (his grand daughter) a largish sum of money (around 100K) to help her buy a home.  

He is however concerned that she will be liable to pay inheritance tax on it if he dies within the 7 year limit for IHT.

So the question I have is..... Assuming he doesn't live another 7 years, if his total estate and assets upon death are under still under the IHT threshold (including any gifts given before he dies) will this gift be exempt from IHT or not?  Thank you.

Voyager2002

BoxerfanUK said:

My father (age 92) wants to gift my daughter (his grand daughter) a largish sum of money (around 100K) to help her buy a home.  

He is however concerned that she will be liable to pay inheritance tax on it if he dies within the 7 year limit for IHT.

So the question I have is..... Assuming he doesn't live another 7 years, if his total estate and assets upon death are under still under the IHT threshold (including any gifts given before he dies) will this gift be exempt from IHT or not?  Thank you.

I think you have answered your own question... if the total estate has a value below the IHT threshold, then no tax is duel That would apply to the entire estate, including gifts made within the seven years preceding death.

BoxerfanUK

Thanks, I thought as much but wasn't sure if there was or wasn't some other inheritance tax rule that applied as well.

I calculate that he has 325K + 175K IHT allowance for him and the same IHT allowance again for my now deceased step-mother (his wife) which passed to him upon her death so he has a total IHT threshold of £1,000,000

FlorayG

Also, isn't it his estate that pays the IT not the daughter?

BoxerfanUK

FlorayG said:

Also, isn't it his estate that pays the IT not the daughter?

Yes I believe it would be if IHT was due.

[Deleted User]

BoxerfanUK said:

FlorayG said:

Also, isn't it his estate that pays the IT not the daughter?

Yes I believe it would be if IHT was due.

No inheritance tax issues. Just be aware that the gift could well be regarded as a deprivation of assets where he is required to move into a nursing/care home at some point. 

BoxerfanUK

[Deleted User] said:

BoxerfanUK said:

FlorayG said:

Also, isn't it his estate that pays the IT not the daughter?

Yes I believe it would be if IHT was due.

No inheritance tax issues. Just be aware that the gift could well be regarded as a deprivation of assets where he is required to move into a nursing/care home at some point. 

Thank you, yes that’s true.

Albermarle

BoxerfanUK said:

[Deleted User] said:

BoxerfanUK said:

FlorayG said:

Also, isn't it his estate that pays the IT not the daughter?

Yes I believe it would be if IHT was due.

No inheritance tax issues. Just be aware that the gift could well be regarded as a deprivation of assets where he is required to move into a nursing/care home at some point. 

Thank you, yes that’s true.

Deprivation of assets only applies if you ask the local authority to pay for care because you have limited assets due to giving money away..  If you self fund, then it is a non issue.

poseidon1

BoxerfanUK said:

My father (age 92) wants to gift my daughter (his grand daughter) a largish sum of money (around 100K) to help her buy a home.  

He is however concerned that she will be liable to pay inheritance tax on it if he dies within the 7 year limit for IHT.

So the question I have is..... Assuming he doesn't live another 7 years, if his total estate and assets upon death are under still under the IHT threshold (including any gifts given before he dies) will this gift be exempt from IHT or not?  Thank you.

If he dies within 7 years, all this does is reduce his nil rate band down to £225,000 on death. A common misconception that failed gifts below the NRB triggers potential IHT on the recipient.

 Regardless of the size of his estate at that time the prior gift to granddaughter does not  in anyway affect her, merely exposes his estate to potential IHT if it exceeds £500k ( minimally) including the failed gift,  or £1 million if transferable nil rate bands available.