Inheritance tax on gifts

poseidon1

JuzaMum said:

For clarity - gifts were given at the same time to siblings, three plus years ago. The giver (parent) is now unwell and the siblings are trying to work out if they need to be prepared for a tax bill. They cannot discuss with the parent due to their health. There will be money/asset left in the estate

Is there a surviving parent who would be significantly disadvantaged in the event  the estate has to pick up the IHT bill?  Are any or all children in a financial position to chip in their shares of any tax due if worse came to the worse?

In the circumstances, life insurance no longer an option.

ader42

Keep_pedalling said:

Agree, this is only likely to be a problem if the beneficiaries of the will are different people. So if the beneficiary is the spouse of the testator the IHT should fall on the children as everything a spouse inheritance is exempt from IHT. 

Is this how HMRC would see it?

I would think HMRC would require the estate to settle the IHT (if it had sufficient means to do so) and the spouse to only inherit the remainder of the estate after IHT. 

It would be interesting if anyone knew the usual HMRC approach to this.

mybestattempt

ader42 said:

Keep_pedalling said:

Agree, this is only likely to be a problem if the beneficiaries of the will are different people. So if the beneficiary is the spouse of the testator the IHT should fall on the children as everything a spouse inheritance is exempt from IHT. 

Is this how HMRC would see it?

I would think HMRC would require the estate to settle the IHT (if it had sufficient means to do so) and the spouse to only inherit the remainder of the estate after IHT. 

It would be interesting if anyone knew the usual HMRC approach to this.

The IHT 400 notes (at page 80) explain how to separately calculate and differentiate on the form IHT 400 between the IHT payable by the estate and the IHT payable by the recipient(s) of the lifetime gift(s). It is clear that these are distinct and may/should be paid separately.

The form IHT403 (page 2) requires the recipient(s) to be identified.

So, the estate is not required to pay IHT due and payable by the recipient(s) and HMRC has the information to deal with them directly and separately if necessary.

JuzaMum

The parent does not have a spouse (passed some time ago)

Albermarle

JuzaMum said:

The parent does not have a spouse (passed some time ago)

Are you aware that they inherit the nil rate band of the first deceased?
So their nil rate band would actually be £650K .

JuzaMum

Thank you all who have commented. I have passed on all I have learned!