Proof of gifts made, in preparation of IHT calculations

Sea_Shell

Good Morning,

Like many of you here already do, I have started to keep detailed records of gifts made, as we move towards making more substantial gifts (likely within allowances) to our Niblings.

We would, currently, be deep into IHT territory.  (deeper still, once pension pots are included)

Would a detailed spreadsheet be sufficient for my executor to show these gifts, and could they rely on it as "proof", or would they still have to trawl through 7 years of bank statements, and 'interview' potential recipients, to verify each transaction, and ensure that none have slipped through 'off the books'?

Should we sign some sort of disclaimer each time we print off the spreadsheet, saying it is an accurate reflection.  Would this protect them?

The reason I ask this now, is that I realised that some smaller gifts made 5 years ago, were made from an account that has since been closed, and wasn't 'switched', so there is no paper trail, other than the basic account information (closing statement) that I've kept.

As a 'rate tart' I have had a myriad of accounts over recent years, so wonder what lengths my executor would need to go to, if they can't rely on my records?

Linton

Sea_Shell said:

Good Morning,

Like many of you here already do, I have started to keep detailed records of gifts made, as we move towards making more substantial gifts (likely within allowances) to our Niblings.

We would, currently, be deep into IHT territory.  (deeper still, once pension pots are included)

Would a detailed spreadsheet be sufficient for my executor to show these gifts, and could they rely on it as "proof", or would they still have to trawl through 7 years of bank statements, and 'interview' potential recipients, to verify each transaction, and ensure that none have slipped through 'off the books'?

Should we sign some sort of disclaimer each time we print off the spreadsheet, saying it is an accurate reflection.  Would this protect them?

The reason I ask this now, is that I realised that some smaller gifts made 5 years ago, were made from an account that has since been closed, and wasn't 'switched', so there is no paper trail, other than the basic account information (closing statement) that I've kept.

As a 'rate tart' I have had a myriad of accounts over recent years, so wonder what lengths my executor would need to go to, if they can't rely on my records?

You could produce signed and dated end of year statements giving amounts, source, dates and recipients of significant gifts in that year and have them stored with your will.  That would make life easier for your executor who would only need to do some sanity checks.

Setting up secret accounts to make large gifts is a pretty obvious tax evasion loophole so one hopes HMRC's checks would find anything substantial. The signed statements should absolve the executor of any personal responsibility for fraud.

Keep_pedalling

As long as your executors have confidence in your record keeping they should be fine with relying on your SS. 

MarzipanCrumble

This may or may not be helpful but I make regular gifts out of income.  I have a spreadsheet that is based on IHT403 (p.8, I think) that shows that I can make these gifts to children totally out of excess income.

Print off each year along with any gifts you make out of capital and keep in your 'Death' file! 

Sea_Shell

MarzipanCrumble said:

This may or may not be helpful but I make regular gifts out of income.  I have a spreadsheet that is based on IHT403 (p.8, I think) that shows that I can make these gifts to children totally out of excess income.

Print off each year along with any gifts you make out of capital and keep in your 'Death' file! 

That's sort of what I was getting at...

You do all that prep work, but would your executor still have to verify all your numbers to prove they are accurate.

Or can they take them at face value.

Do you (should you) make a signed declaration on your printouts?

Sea_Shell

Linton said:

Sea_Shell said:

Good Morning,

Like many of you here already do, I have started to keep detailed records of gifts made, as we move towards making more substantial gifts (likely within allowances) to our Niblings.

We would, currently, be deep into IHT territory.  (deeper still, once pension pots are included)

Would a detailed spreadsheet be sufficient for my executor to show these gifts, and could they rely on it as "proof", or would they still have to trawl through 7 years of bank statements, and 'interview' potential recipients, to verify each transaction, and ensure that none have slipped through 'off the books'?

Should we sign some sort of disclaimer each time we print off the spreadsheet, saying it is an accurate reflection.  Would this protect them?

The reason I ask this now, is that I realised that some smaller gifts made 5 years ago, were made from an account that has since been closed, and wasn't 'switched', so there is no paper trail, other than the basic account information (closing statement) that I've kept.

As a 'rate tart' I have had a myriad of accounts over recent years, so wonder what lengths my executor would need to go to, if they can't rely on my records?

You could produce signed and dated end of year statements giving amounts, source, dates and recipients of significant gifts in that year and have them stored with your will.  That would make life easier for your executor who would only need to do some sanity checks.

Setting up secret accounts to make large gifts is a pretty obvious tax evasion loophole so one hopes HMRC's checks would find anything substantial. The signed statements should absolve the executor of any personal responsibility for fraud.

Who would be "guilty"?  The deceased?

Would an unwitting executor be liable, and would the estate beneficiaries be expected to repay any IHT...even if they weren't the original recipient.

Linton

Sea_Shell said:

Linton said:

Sea_Shell said:

Good Morning,

Like many of you here already do, I have started to keep detailed records of gifts made, as we move towards making more substantial gifts (likely within allowances) to our Niblings.

We would, currently, be deep into IHT territory.  (deeper still, once pension pots are included)

Would a detailed spreadsheet be sufficient for my executor to show these gifts, and could they rely on it as "proof", or would they still have to trawl through 7 years of bank statements, and 'interview' potential recipients, to verify each transaction, and ensure that none have slipped through 'off the books'?

Should we sign some sort of disclaimer each time we print off the spreadsheet, saying it is an accurate reflection.  Would this protect them?

The reason I ask this now, is that I realised that some smaller gifts made 5 years ago, were made from an account that has since been closed, and wasn't 'switched', so there is no paper trail, other than the basic account information (closing statement) that I've kept.

As a 'rate tart' I have had a myriad of accounts over recent years, so wonder what lengths my executor would need to go to, if they can't rely on my records?

You could produce signed and dated end of year statements giving amounts, source, dates and recipients of significant gifts in that year and have them stored with your will.  That would make life easier for your executor who would only need to do some sanity checks.

Setting up secret accounts to make large gifts is a pretty obvious tax evasion loophole so one hopes HMRC's checks would find anything substantial. The signed statements should absolve the executor of any personal responsibility for fraud.

Who would be "guilty"?  The deceased?

Would an unwitting executor be liable, and would the estate beneficiaries be expected to repay any IHT...even if they weren't the original recipient.

I am not a lawyer, but surely the courts would consider it unreasonable for a lay executor to be expected to act as a forensic accountant should the testator have been particularly devious.

Notepad_Phil

Sea_Shell said:

Linton said:

Sea_Shell said:

Good Morning,

Like many of you here already do, I have started to keep detailed records of gifts made, as we move towards making more substantial gifts (likely within allowances) to our Niblings.

We would, currently, be deep into IHT territory.  (deeper still, once pension pots are included)

Would a detailed spreadsheet be sufficient for my executor to show these gifts, and could they rely on it as "proof", or would they still have to trawl through 7 years of bank statements, and 'interview' potential recipients, to verify each transaction, and ensure that none have slipped through 'off the books'?

Should we sign some sort of disclaimer each time we print off the spreadsheet, saying it is an accurate reflection.  Would this protect them?

The reason I ask this now, is that I realised that some smaller gifts made 5 years ago, were made from an account that has since been closed, and wasn't 'switched', so there is no paper trail, other than the basic account information (closing statement) that I've kept.

As a 'rate tart' I have had a myriad of accounts over recent years, so wonder what lengths my executor would need to go to, if they can't rely on my records?

You could produce signed and dated end of year statements giving amounts, source, dates and recipients of significant gifts in that year and have them stored with your will.  That would make life easier for your executor who would only need to do some sanity checks.

Setting up secret accounts to make large gifts is a pretty obvious tax evasion loophole so one hopes HMRC's checks would find anything substantial. The signed statements should absolve the executor of any personal responsibility for fraud.

Who would be "guilty"?  The deceased?

Would an unwitting executor be liable, and would the estate beneficiaries be expected to repay any IHT...even if they weren't the original recipient.

Agree with Linton above about the lay executor not being liable (assuming of course they had no knowledge of what was going on).

As to the repayment, then as the IHT was less than it should have been and so more was paid out, then yes I would expect that the estate beneficiaries would be expected to repay their overpayment. 

Sea_Shell

Just on gifting more generally.

AIUI gifts out of a Joint account are treated as joint.  50/50?

What about if one is claiming they are from "excess income"?     

Does one have to show that as a 'couple' income was excess, or per person, and how should that be recorded.

eg  husband has pension of £40k pa, wife has £15k, so Joint income of £55k.   They have Joint expenses of £30k, so they have £25k in excess, as a couple.   Gifts are given from their joint account.

Or do the expenses have to be halved and then set against each's own individual income?

Husband has £15k of expenses and £40k income, so £25k spare for him
Wife has £15k of expenses, but only £15k income, so no spare available

Or does it make no difference for married couples, as no IHT payable on first death.

How does it work if the second death occurs shortly afterwards, within 7 years?

Hal17

Hi Sea_Shell, we have been gifting from income for about 4 years now.

I have tried to read all the information about gifting from income that I could find. At some point I read that you need to treat the allocation of gifts as individuals not as a joint income.

My income stream is higher than my OH, so we allocate accordingly. We split household expenditure 50/50 and record spending on individual hobbies separately. For example I ride a motorcycle as a hobby and would not expect my OH to contribute to those associated costs, nor me to her craft room activities.

I have always kept accurate income and budget spreadsheets.

Each year I print a detailed individual income and expenditure budget for both of us, the letters to our children relating to each gift we have made are printed and copies of our bank statements showing the gifts leaving our current account. I also update a draft copy of page 8 of the IHT403 form adding each new tax year.

These are then filed for future reference. To be honest I don't know if this too much detail, but we certainly like to see the difference our gifting from income makes and I enjoy doing the admin involved.   

Keep_pedalling

Sea_Shell said:

Just on gifting more generally.

AIUI gifts out of a Joint account are treated as joint.  50/50?

What about if one is claiming they are from "excess income"?     

Does one have to show that as a 'couple' income was excess, or per person, and how should that be recorded.

eg  husband has pension of £40k pa, wife has £15k, so Joint income of £55k.   They have Joint expenses of £30k, so they have £25k in excess, as a couple.   Gifts are given from their joint account.

Or do the expenses have to be halved and then set against each's own individual income?

Husband has £15k of expenses and £40k income, so £25k spare for him
Wife has £15k of expenses, but only £15k income, so no spare available

Or does it make no difference for married couples, as no IHT payable on first death.

How does it work if the second death occurs shortly afterwards, within 7 years?

In that example only the husband has excess income so he is the only one who can make those exempt gifts so it would be cleaner for him to make those gifts from a sole account.