Making a large gift and IHT implications?

macadam

I plan to leave my niece, £200K as a large gift while I'm still living.

I'm aware of the 7-year taper relief rule affecting this should I die before 2032.

Would this gift adversely affect me if I continued to make the £3K yearly tax-free gift allowance?... and would it leave me open to being taxed?

RAS

Are you leaving your niece £200k in your will? 

Or are you gifting her £200k (whilst you are alive)? 

bobster2

There is no taper relief for gifts during the 7 years prior to death unless the total value of any gifts made during those 7 years exceeds the nil rate band (£325,000).

So the £200,000 would just use up a big chunk of your NRB.

Keep_pedalling

What is your current net worth? What is your marital status? 

One option, if you are in good health, is to take out term insurance to cover IHT on large gifts in case of an early demise. So if your estate would get hit with an IHT liability on the entire gift then you would need a 7 year policy that would pay out £80k on your death. 

macadam

RAS said:

Are you leaving your niece £200k in your will? 

Or are you gifting her £200k (whilst you are alive)? 

Sorry if I made this unclear. I'm making it as a gift to her while I'm still alive.

macadam

Keep_pedalling said:

What is your current net worth? What is your marital status? 

One option, if you are in good health, is to take out term insurance to cover IHT on large gifts in case of an early demise. So if your estate would get hit with an IHT liability on the entire gift then you would need a 7 year policy that would pay out £80k on your death. 

Net worth £700K in shares, and a house worth approximately £300K.   Marital status... Single.

I'll look into the term insurance to cover IHT, though I plan on lasting longer than 7 years.

poseidon1

macadam said:

Keep_pedalling said:

What is your current net worth? What is your marital status? 

One option, if you are in good health, is to take out term insurance to cover IHT on large gifts in case of an early demise. So if your estate would get hit with an IHT liability on the entire gift then you would need a 7 year policy that would pay out £80k on your death. 

Net worth £700K in shares, and a house worth approximately £300K.   Marital status... Single.

I'll look into the term insurance to cover IHT, though I plan on lasting longer than 7 years.

Sadly like myself you only have £325k available by way of NRB, so a significant IHT exposure on your £1 million estate.

Making the £200k gift now would simply impact your NRB on death within 7 years, reducing it to a miserable £125k. 

Survive the 7 years, then your £325k NRB is revived.

Term assurance for the 7 years ( if cheap enough ) is a good idea, just make sure it is written trust in favour of who you plan to leave your estate, otherwise the policy proceeds will enlarge your taxable estate and worsen the IHT.

By all means continue with your £3k annual gifts. With so little available by way of NRB, making use of other available exemptions makes a great deal of sense in your circumstances.

Keep_pedalling

macadam said:

Keep_pedalling said:

What is your current net worth? What is your marital status? 

One option, if you are in good health, is to take out term insurance to cover IHT on large gifts in case of an early demise. So if your estate would get hit with an IHT liability on the entire gift then you would need a 7 year policy that would pay out £80k on your death. 

Net worth £700K in shares, and a house worth approximately £300K.   Marital status... Single.

I'll look into the term insurance to cover IHT, though I plan on lasting longer than 7 years.

 If you are fit and healthy the insurance should be quite cheap so worth doing. 

As for further IHT planning, I think it’s time to live it up a bit and spend some of it. 

macadam

poseidon1 said:

macadam said:

Keep_pedalling said:

What is your current net worth? What is your marital status? 

One option, if you are in good health, is to take out term insurance to cover IHT on large gifts in case of an early demise. So if your estate would get hit with an IHT liability on the entire gift then you would need a 7 year policy that would pay out £80k on your death. 

Net worth £700K in shares, and a house worth approximately £300K.   Marital status... Single.

I'll look into the term insurance to cover IHT, though I plan on lasting longer than 7 years.

Sadly like myself you only have £325k available by way of NRB, so a significant IHT exposure on your £1 million estate.

Making the £200k gift now would simply impact your NRB on death within 7 years, reducing it to a miserable £125k. 

Survive the 7 years, then your £325k NRB is revived.

Term assurance for the 7 years ( if cheap enough ) is a good idea, just make sure it is written trust in favour of who you plan to leave your estate, otherwise the policy proceeds will enlarge your taxable estate and worsen the IHT.

By all means continue with your £3k annual gifts. With so little available by way of NRB, making use of other available exemptions makes a great deal of sense in your circumstances.

The big question is ... Do I want to risk surviving the 7 years in good health?  I'm 72, and a lot can go wrong with your health in that length of time.

I'll make enquiries into Term assurance in a Trust, but I've heard the older you are, the more the premiums start to become prohibitive.

macadam

Keep_pedalling said:

macadam said:

Keep_pedalling said:

What is your current net worth? What is your marital status? 

One option, if you are in good health, is to take out term insurance to cover IHT on large gifts in case of an early demise. So if your estate would get hit with an IHT liability on the entire gift then you would need a 7 year policy that would pay out £80k on your death. 

Net worth £700K in shares, and a house worth approximately £300K.   Marital status... Single.

I'll look into the term insurance to cover IHT, though I plan on lasting longer than 7 years.

 If you are fit and healthy the insurance should be quite cheap so worth doing. 

As for further IHT planning, I think it’s time to live it up a bit and spend some of it. 

I agree with you about living it up a bit, and splashing the cash on myself, but to be honest, when you reach a certain age, the idea of a fancy car and expensive holidays no longer excite me.

I'll get a number of quotes for term assurance in a Trust, so I can compare the premiums.

Sea_Shell

Who, ultimately, are your beneficiaries?

If you have sufficient £££ remaining in your estate to settle any potential IHT bill, is there a need to buy insurance?