Larger car purchased

clonkel

@poppystar The house recently sold for £270k and he and his wife (who is still alive and in long-term care) were tenants in common. I understood that his estate would be half of this with the other half going to his wife who is still alive?

In his will he left his half to his children

poppystar

clonkel said:

@poppystar The house recently sold for £270k and he and his wife (who is still alive and in long-term care) were tenants in common. I understood that his estate would be half of this with the other half going to his wife who is still alive?

In his will he left his half to his children

Sorry misread - I thought he was the surviving spouse.

doodling

Hi,

Keep_pedalling said:

If you are thinking of inheritance tax, then unless the gift was over £325k you have no tax liability.

Isn't what matters is the total of the (non-exempt) gifts made in the last 7 years, not just the size of a specific gift?

You can't give away £5m in £200k chunks to separate recipients in the 7 years before you die leaving yourself with £100k and expect HMRC to leave the recipients alone.

Keep_pedalling

doodling said:

Hi,

Keep_pedalling said:

If you are thinking of inheritance tax, then unless the gift was over £325k you have no tax liability.

Isn't what matters is the total of the (non-exempt) gifts made in the last 7 years, not just the size of a specific gift?

You can't give away £5m in £200k chunks to separate recipients in the 7 years before you die leaving yourself with £100k and expect HMRC to leave the recipients alone.

Correct, I had rather assumed this was the only gift as no others were mentioned. 

Keep_pedalling

clonkel said:

Sorry because this is the probate board I did not say that my FiL sadly passed away in July of this year.

He made the payment to us to get the bigger car in 2024

The total value of the estate will be around £152k including the house which was recently sold for £270k and it was tenants in common so he will get half less costs which is £132k plus £20k in savings = £152k

He also made a payment to my BiL to pay for his hip replacement back in 2022/23

Looking at the rules I thought I would have to pay tax on the £10k gift less £3k for allowance which is £7k x 40% = £2800

My BiL the same but a lower percentage

The £2800 would then come out of the estate but it still has to be paid although in this case by the estate. Does this mean the estate has to pay IHT of £2800 which comes out of the £152k?

Unfortunately the other children did not know about this as FiL asked us not to tell them. They will now find out as it will be deducted from the estate

OR

There is no tax to be paid and the estate is still worth £152k because there is £173k still remaining therefore the £10k to us and the £10k to the BiL will not be taxed to us nor will it reduce the £152k as the £20k is below the remaining allowance of £173k

thank you for your patience 

All those gifts do is lower his Nil Rate Band from £325k to £305k so still way over the value of his estate so absolutely no tax due and no IHT return to do. 

Gifts only form part of an estate for IHT purposes so if it is going to cause problems with the family I would not mention it in the estate accounts.

clonkel

@Keep_pedalling thank you. Yes it is going to be an issue. 

When probate is completed online we will have to put in the itemised gifts over the last 7 years

I have just done a check online whether he needs to pay IHT and he is significantly under

How do I not mention it in the estate accounts? (I assumed the probate figures online would just be part of the report that goes to each beneficiary)

thank you

Keep_pedalling

clonkel said:

@Keep_pedalling thank you. Yes it is going to be an issue. 

When probate is completed online we will have to put in the itemised gifts over the last 7 years

I have just done a check online whether he needs to pay IHT and he is significantly under

How do I not mention it in the estate accounts? (I assumed the probate figures online would just be part of the report that goes to each beneficiary)

thank you

That level of detail is only required if you need to do an IHT return and with the relatively low value of the estate you don’t need to do one of these. All you need to provide is the value of the estate for IHT and probate purposes. The probate values do not include the gifts.  Even if you did have to do an IHT return only the probate value appears on the grant of probate and the IHT figures never become public information.

If the deceased did not want anyone to know about the gifts, then you can maintain that confidentiality after their death. 

In what financial years were the gifts made? 

clonkel

@Keep_pedalling thank you for the reply.

The gifts were made in 2022 and 2024

Keep_pedalling

clonkel said:

@Keep_pedalling thank you for the reply.

The gifts were made in 2022 and 2024

Assuming that none of his annual £3000 exemption were used on smaller gifts then then with the first gift only £4000 of it needs to be declared as the exemption for that year can be claimed along with the previous year’s unused exemption. How much that can be deducted from the second gift depends on the exact date of both gifts as it is based on financial years not calendar years.

So if we are talking about FY 21/22 and 24/25 then you also have two lots of exemption fot the second gift, otherwise it is one.

clonkel

@Keep_pedalling

thank you