Gift of cash. Is it just IHT we have to think about?

pidgeonpost

Our daughter is going through an amicable divorce. The house is owned 50/50 between her and her partner, and she would like to buy her partner out. My wife and I are considering a cash donation to enable her to do this. We're guessing that IHT rules will apply. Ultimately this sizeable chunk of money will go to her ex-partner to enable house purchase, so is there anything else we need to consider? For example, is it possible to 'protect' this money in some way to ensure it's not lost during the divorce and her partner's subsequent house purchase? Any clues appreciated. 

Keep_pedalling

You don’t really need to worry about IHT gifting never increases your IHT liability, and after 7 years can significantly reduce it. 

If you gift the money after they have sorted their financial settlement there should be no comeback on your daughter. 

eskbanker

pidgeonpost said:

Our daughter is going through an amicable divorce. The house is owned 50/50 between her and her partner, and she would like to buy her partner out. My wife and I are considering a cash donation to enable her to do this. We're guessing that IHT rules will apply. Ultimately this sizeable chunk of money will go to her ex-partner to enable house purchase, so is there anything else we need to consider? For example, is it possible to 'protect' this money in some way to ensure it's not lost during the divorce and her partner's subsequent house purchase? Any clues appreciated. 

Are the parties being represented by solicitors?  This will generally be advisable, however amicable, to ensure that a clean break is achieved with a clear and binding financial settlement, rather than potentially leaving one or both open to claims later on, so if this is already in hand then her solicitor can advise, or if it isn't then it may be time to look at engaging one....

Albermarle

eskbanker said:

pidgeonpost said:

Our daughter is going through an amicable divorce. The house is owned 50/50 between her and her partner, and she would like to buy her partner out. My wife and I are considering a cash donation to enable her to do this. We're guessing that IHT rules will apply. Ultimately this sizeable chunk of money will go to her ex-partner to enable house purchase, so is there anything else we need to consider? For example, is it possible to 'protect' this money in some way to ensure it's not lost during the divorce and her partner's subsequent house purchase? Any clues appreciated. 

Are the parties being represented by solicitors?  This will generally be advisable, however amicable, to ensure that a clean break is achieved with a clear and binding financial settlement, rather than potentially leaving one or both open to claims later on, so if this is already in hand then her solicitor can advise, or if it isn't then it may be time to look at engaging one....

As above. 
It is much better to get a legal agreement about splitting assets as part of the divorce. Normally everything should be split 50:50, not just the house.
It will include everything, like savings , pensions, cars etc.
It means then that there is no possibility of either partner trying to revisit the situation at a later date.
Personally I would not gift any money until this agreement was made legal and the divorce finalised.

MyRealNameToo

pidgeonpost said:

Our daughter is going through an amicable divorce. The house is owned 50/50 between her and her partner, and she would like to buy her partner out. My wife and I are considering a cash donation to enable her to do this. We're guessing that IHT rules will apply. Ultimately this sizeable chunk of money will go to her ex-partner to enable house purchase, so is there anything else we need to consider? For example, is it possible to 'protect' this money in some way to ensure it's not lost during the divorce and her partner's subsequent house purchase? Any clues appreciated. 

They divorce first, agree the splits then after the divorce you help her buy him out of the house (assuming thats what she wants) and a nest egg for her. 

The two considerations are IHT if you die with in 7 years and deprivation of assets if you need to go into care or claim benefits in the medium term. 

EthicsGradient

When thinking of "if you die" in this situation, I suppose it would also be good to make sure both you and your wife have wills leaving everything first to the surviving spouse, so that in the case of a sudden death, you don't increase your daughter's wealth before the divorce is finalised. The survivor could then make the gift once it is finalised.

pidgeonpost

Thanks for your comments and suggestions folks. We'll be discussing this in the next day or two so I may be back! 😊

Keep_pedalling

MyRealNameToo said:

pidgeonpost said:

Our daughter is going through an amicable divorce. The house is owned 50/50 between her and her partner, and she would like to buy her partner out. My wife and I are considering a cash donation to enable her to do this. We're guessing that IHT rules will apply. Ultimately this sizeable chunk of money will go to her ex-partner to enable house purchase, so is there anything else we need to consider? For example, is it possible to 'protect' this money in some way to ensure it's not lost during the divorce and her partner's subsequent house purchase? Any clues appreciated. 

The two considerations are IHT if you die with in 7 years and deprivation of assets if you need to go into care or claim benefits in the medium term. 

Dying within 7 years has no negative impact on your potential IHT liability and therefore should not come into the equation. If you do die in that period it just means the amount of IHT to be paid, if any, is going to be the same or slightly less `(some of the gift may be covered by the annual exemption) than it would have been paid if you never made the gift at all.

Deliberate deprivation of assets, might be a consideration if the gift left the OP short of funds for their own needs, but if they are currently in good heath and can afford the gift then they can forget that as well.