Whose gift is it anyway?

aroominyork

https://forums.moneysavingexpert.com/discussion/comment/81860399#Comment_81860399

It’s not so clear that the recipient does not need to know because they could have a nasty shock in store. We are updating our wills and the solicitor’s intention was to draft that if, for example, we give away £400,000 and don’t survive by 7 years then the total £325,000 allowance will have been used and there will potentially be IHT to pay on £75,000 at a rate of 40% - due to be paid by the beneficiary of the gift unless there is a statement in the will to the contrary.

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/81862576#Comment_81862576

Indeed it is often overlooked that in the case of failed PETs that exceed the NRB on death, the primary IHT on the PET falls on the gift recipient, subject to taper relief if applicable.

Only if the recipient does not or won't pay does the liability then fall back on estate - see below

https://emgsolicitors.com/inheritance-tax-tips-and-other-lifetime-gifting/#:~:text=IHT%20will%20be%20payable%20on,is%20payable%20from%20their%20estate.&text=The%20concept%20of%20taper%20relief,will%20be%20no%20taper%20relief.

Failing to notify the gift recipient of this potential situation, would in my view be inconsiderate leaving the beneficiary exposed if they had spent the gift in its entirety, and especially if a 7 year reducing term policy is viable to protect the gift over the exposed period.

aroominyork

If the legal default is that the recipient is liable for IHT on failed lifetime PETs, I wonder whether solicitors routinely make clients aware of this when drafting wills? I expect we will insert a clause into ours that all IHT is paid by the estate. I don't understand why that isn't the default - surely it's more in line with a testator's usual wishes about the money they wanted to give away during their lifetime and what they wanted done with the funds left on death.

Keep_pedalling

https://forums.moneysavingexpert.com/discussion/comment/81864049#Comment_81864049

Are you planning on giving away over £325k each? If not then that is a pointless clause, if you are you really should take advice from a tax specialist, the vast majority of solicitors are not qualified to give such advice.