Gifts from income iht

Anotheroperalover

Hi all. I've ploughed through all the threads associated with this topic and it all seems very complicated. Just one question not totally answered unless I missed it. 
If I transfer all interest received from my ISA accounts (no tax to pay) to a separate account labelled surplus income and then distribute it at the end of the year to my children. Then mark a paper copy of the statement with 'interest from....' etc. Is this not simple and why would HMRC not accept it as proof when I'm gone that I obviously did not need that income for my normal lifestyle? 
Thanks in advance for disillusioning me!

Keep_pedalling

Why is it obvious? you could be giving that to your children but spending your savings on expenditure. If you want your estate to claim this you need to keep very good records of both income and expenditure otherwise your executors are going to have a hard time claiming it. See IHT 403 page 8, to see what they are going to need to provide.

https://assets.publishing.service.gov.uk/media/5f60b44cd3bf7f7234487bf0/IHT403-05-20.pdf

Is your estate already in IHT territory? If it is are you also thinking of make one off larger gifts? Are you using your annual exemptions? 

EdSwippet

Keep_pedalling said:

Why is it obvious? you could be giving that to your children but spending your savings on expenditure. If you want your estate to claim this you need to keep very good records of both income and expenditure otherwise your executors are going to have a hard time claiming it. See IHT 403 page 8, to see what they are going to need to provide.

Yup. It's truly insane. I have POA for my mother, and every year I go through every single one of her bank transactions (in total, on average 500 or more) and categorise each of them, so that if or when I have to (or someone else has to) fill out the uber-invasive IHT 403 page 8, the information is all there ready and waiting.

The cash saving to the final estate from doing this is decent, but really, it's madness that it's even necessary at what are after all pretty mediocre asset levels.

IHT is the UK's most hated tax doubtless for many reasons. The above must surely be one of them.

Keep_pedalling

I have never really got the hatred for IHT, it is after all unearned wealth and earned income is taxed far higher. 

BikingBud

EdSwippet said:

Keep_pedalling said:

Why is it obvious? you could be giving that to your children but spending your savings on expenditure. If you want your estate to claim this you need to keep very good records of both income and expenditure otherwise your executors are going to have a hard time claiming it. See IHT 403 page 8, to see what they are going to need to provide.

Yup. It's truly insane. I have POA for my mother, and every year I go through every single one of her bank transactions (in total, on average 500 or more) and categorise each of them, so that if or when I have to (or someone else has to) fill out the uber-invasive IHT 403 page 8, the information is all there ready and waiting.

The cash saving to the final estate from doing this is decent, but really, it's madness that it's even necessary at what are after all pretty mediocre asset levels.

IHT is the UK's most hated tax doubtless for many reasons. The above must surely be one of them.

Are people over thinking all this?

• Income is known - if sums are being drawn from savings or other sources then likely presence of surplus income may be questionable.
• Bills are known. Mortgage/Rent/CT/Utilities etc 
• Other living costs should fairly straightforward as food/entertaining 
• Discretionary Items should be clear - especially if no cars or holidays are being paid for.
• If there is income left, savings or investment rising year on year then it is obvious that there is surplus.
• If there is income left, savings or investment rising year on year then it is obvious that there is surplus.
• Gifts should be known and clearly traceable, especially those that form a pattern.

If it is clear and obvious then it will always be so.

If it is not clear and obvious then creative activities might not pass any scrutiny.

fuzzzzy

BikingBud said:

EdSwippet said:

Keep_pedalling said:

Why is it obvious? you could be giving that to your children but spending your savings on expenditure. If you want your estate to claim this you need to keep very good records of both income and expenditure otherwise your executors are going to have a hard time claiming it. See IHT 403 page 8, to see what they are going to need to provide.

Yup. It's truly insane. I have POA for my mother, and every year I go through every single one of her bank transactions (in total, on average 500 or more) and categorise each of them, so that if or when I have to (or someone else has to) fill out the uber-invasive IHT 403 page 8, the information is all there ready and waiting.

The cash saving to the final estate from doing this is decent, but really, it's madness that it's even necessary at what are after all pretty mediocre asset levels.

IHT is the UK's most hated tax doubtless for many reasons. The above must surely be one of them.

Are people over thinking all this?

• Income is known - if sums are being drawn from savings or other sources then likely presence of surplus income may be questionable.
• Bills are known. Mortgage/Rent/CT/Utilities etc 
• Other living costs should fairly straightforward as food/entertaining 
• Discretionary Items should be clear - especially if no cars or holidays are being paid for.
• If there is income left, savings or investment rising year on year then it is obvious that there is surplus.
• If there is income left, savings or investment rising year on year then it is obvious that there is surplus.
• Gifts should be known and clearly traceable, especially those that form a pattern.

If it is clear and obvious then it will always be so.

If it is not clear and obvious then creative activities might not pass any scrutiny.

Even ignoring all the little questions surrounding what is income and what is capital etc, it is still a pain in the !!!!!! to do though, to ensure the executor of your estate has all the documents they need as proof should it be required.

BikingBud

fuzzzzy said:

BikingBud said:

EdSwippet said:

Keep_pedalling said:

Why is it obvious? you could be giving that to your children but spending your savings on expenditure. If you want your estate to claim this you need to keep very good records of both income and expenditure otherwise your executors are going to have a hard time claiming it. See IHT 403 page 8, to see what they are going to need to provide.

Yup. It's truly insane. I have POA for my mother, and every year I go through every single one of her bank transactions (in total, on average 500 or more) and categorise each of them, so that if or when I have to (or someone else has to) fill out the uber-invasive IHT 403 page 8, the information is all there ready and waiting.

The cash saving to the final estate from doing this is decent, but really, it's madness that it's even necessary at what are after all pretty mediocre asset levels.

IHT is the UK's most hated tax doubtless for many reasons. The above must surely be one of them.

Are people over thinking all this?

• Income is known - if sums are being drawn from savings or other sources then likely presence of surplus income may be questionable.
• Bills are known. Mortgage/Rent/CT/Utilities etc 
• Other living costs should fairly straightforward as food/entertaining 
• Discretionary Items should be clear - especially if no cars or holidays are being paid for.
• If there is income left, savings or investment rising year on year then it is obvious that there is surplus.
• If there is income left, savings or investment rising year on year then it is obvious that there is surplus.
• Gifts should be known and clearly traceable, especially those that form a pattern.

If it is clear and obvious then it will always be so.

If it is not clear and obvious then creative activities might not pass any scrutiny.

Even ignoring all the little questions surrounding what is income and what is capital etc, it is still a pain in the !!!!!! to do though, to ensure the executor of your estate has all the documents they need as proof should it be required.

Nope just another page on a spreadsheet that emulates the form. The form is in big handfuls and the spreadsheet should also be in big handfuls. Further detail, bank or credit card statements can underpin if required, however if large amounts of cash are going untraceable again creative activities might not pass scrutiny.

It is only a budget and reconciling accounts, some do it, some don't.

If it's too much hassle then don't but I keep it going and forecast surplus from pension growth and projected expenditure! If the annual buffer is not being spent and the running buffer is growing too large it needs to go before it becomes capital as it appears that it could be a problem later.

fuzzzzy

BikingBud said:

fuzzzzy said:

BikingBud said:

EdSwippet said:

Keep_pedalling said:

Why is it obvious? you could be giving that to your children but spending your savings on expenditure. If you want your estate to claim this you need to keep very good records of both income and expenditure otherwise your executors are going to have a hard time claiming it. See IHT 403 page 8, to see what they are going to need to provide.

Yup. It's truly insane. I have POA for my mother, and every year I go through every single one of her bank transactions (in total, on average 500 or more) and categorise each of them, so that if or when I have to (or someone else has to) fill out the uber-invasive IHT 403 page 8, the information is all there ready and waiting.

The cash saving to the final estate from doing this is decent, but really, it's madness that it's even necessary at what are after all pretty mediocre asset levels.

IHT is the UK's most hated tax doubtless for many reasons. The above must surely be one of them.

Are people over thinking all this?

• Income is known - if sums are being drawn from savings or other sources then likely presence of surplus income may be questionable.
• Bills are known. Mortgage/Rent/CT/Utilities etc 
• Other living costs should fairly straightforward as food/entertaining 
• Discretionary Items should be clear - especially if no cars or holidays are being paid for.
• If there is income left, savings or investment rising year on year then it is obvious that there is surplus.
• If there is income left, savings or investment rising year on year then it is obvious that there is surplus.
• Gifts should be known and clearly traceable, especially those that form a pattern.

If it is clear and obvious then it will always be so.

If it is not clear and obvious then creative activities might not pass any scrutiny.

Even ignoring all the little questions surrounding what is income and what is capital etc, it is still a pain in the !!!!!! to do though, to ensure the executor of your estate has all the documents they need as proof should it be required.

Nope just another page on a spreadsheet that emulates the form. The form is in big handfuls and the spreadsheet should also be in big handfuls. Further detail, bank or credit card statements can underpin if required, however if large amounts of cash are going untraceable again creative activities might not pass scrutiny.

It is only a budget and reconciling accounts, some do it, some don't.

If it's too much hassle then don't but I keep it going and forecast surplus from pension growth and projected expenditure! If the annual buffer is not being spent and the running buffer is growing too large it needs to go before it becomes capital as it appears that it could be a problem later.

I did it last year and will continue to do it every year from now on, but still maintain, as a scatterbrain who hates admin, that it is a pain in the !!!!!!.

Edit added: I have just spied your spreadsheet on another thread

https://forums.moneysavingexpert.com/discussion/6570127/income-expenditure-and-gifting-from-excess-income/p3

It has inspired me to attempt to put something similar together myself (once I am retired and have more time).