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Inheritance tax question - Gift from Dad
Morning all,
Looking for inheritance tax advice.
Father is 82 but in very good health. Mother died circa 10 years ago. He has owns his own property outright worth ~£300k
He has a significant savings fund of circa £290k and some small savings pots or circa £50k. So his total estate is above the £325k threshold.
He has accepted that he does not ‘need’ the amount of money he has saved up and is looking to push some of it down to me and my sister as the only beneficiaries.
Clearly inheritance tax is a consideration so we are wanting to make sure that we do things properly to avoid any avoidable tax consequences.
He’s been advised by his fund manager that he should follow the <£3k and small regular donations route. However we’ve been discussing whether he should actually pass down a significant gift of circa £60k (£30k each) at this stage given that he doesn’t think he needs it and he should hopefully live past the 7 year window so it is best to pass it down now rather than wait.
Please can all you tax advisors confirm that my logic is sound and that there are no negative financial/tax implications of passing down a large gift at this stage??
(I have also been advised that his wife (my mum’s) estate allowance would also be taken into account from NRB and RNRB so actually none of his estate would fall inside the IHT threshold – is that also correct)?
I welcome advice please.
Best Regards
Comments
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Your Dad has his own NRB and RNRB so giving £500k. He then has his wife’s NRB and RNRB assuming she hasn’t used any and had passed everything to your Dad. So potentially £1m for your Dad to use. So doesn’t sound like any IHT will be due.
1 -
The biggest concern he should have is falling foul of the deprivation of assets rule. You won’t know 100% for sure whether he will need this money to pay for a care home but it doesn’t sound like he’ll be short of money.
Other than that any money he gives you now will be subject to less inheritance tax than if he holds on to it, regardless of how long he lives. So no real downside to gifting it now, apart from the fact that the will no longer have the money that he gifts of course.1 -
Father is 82 but in very good health. Mother died circa 10 years ago. He has owns his own property outright worth ~£300k
He has a significant savings fund of circa £290k and some small savings pots or circa £50k. So his total estate is above the £325k threshold.
Is the property his main residence and did Mother leave everything to Father when she died?
If so, then they each also have an 175k RNRB on top of the 325k NRB, plus her band carries over to him, giving a total £1 million band, which it sounds like he's comfortably inside. I'd leave well alone, so he has the money available in case he wants to choose his care, or splurge and the rest can be left to the kids with no tax.
3 -
As your Dad's estate seems very unlikely to be liable for IHT ( assuming he leaves the house to his children) then there is nothing to discuss regarding gifts.
Who is this 'fund manager' some kind of financial advisor? If so seems very surprising they are talking about £3K gifts, when the estate will not be liable for IHT anyway.
2 -
Did your Mother leave everything to your Father?
If so, it is quite probable that the available IHT allowance is around £1m (assuming the house will be left to children) and the total Estate around £600k is considerably below this level.
As caring and loving children, you should be encouraging your Father to use the money he has to enjoy his years as much as he possibly can.
He may wish to buy things to make his life easier (either now or later), so riser chair, mobility scooter, etc.
He may wish to buy things to just enjoy nicer stuff - as an example, my Mum struggles to get out to the garden but she just had all the patio cleaned and bought a new garden chair and table so that she can sit out as much as she can when the weather improves. She also employs a gardener so that she is looking out over a "tended" garden rather than overgrown.
He may wish to do things - trips out, holidays, or even something more adventurous.
He really ought to keep a substantial amount as liquid assets so that he can pay for any care needs that might arise and chose what type of care that is and where and when that care is available.In short - there seems to be no benefit to your Father in gifting £60k to his children now.
1 -
You father’s estate is way below IHT territory so there is no reason for him to give his assets away to avoid IHT. This does not mean he can’t be generous with some cash gifts. As he owns a home making cash gifts is not likely to be treated as deprivation of assets, but holding on to significant savings is going to give him more options should he needs significant care requirements in the future.
One advantage of having significant cash assets is that you will have the option of paying for a live in carer as an alternative to residential care so he should consider that.
1 -
All,
Many thanks for the inputs so far. Can i please check on a couple of threads.
- value of estate - Why do some consider his estate to be below the threshold if his house is ~£300k and his assets are circa £300k is that not above the £500k threshold (including property)??
- Yes it is his main and only residence and my mother passed on everything to him by default when she passed away I believe.
- If the reason for the above is my deceased mothers contribution then i'd understood from HMRC website that a transfer request (NRB/RNRB) would have needed to be submitted within 2 yrs of her death? Is this not correct( Transferring unused basic threshold for Inheritance Tax - GOV.UK)
- Given the above - there are no negative tax implications of him passing his money down (IF HE CHOOSES to) at this stage. Gifts carry no tax implications for either the giver or reciever?
- the £3k per year pass down is a red-herring at this stage. I personally think this is his fund manager trying to keep money within his fund so that he can earn is 4% fee on a greater pot.
With regards to all the comments about keeping provision for the things he wants to do and for future care, we've absolutely considered this and discussed his potential care needs. Firstly that's the reason we are only pulling down some of his savings (£50/60k out of £300k). Secondly one of the things i am spending the money on is converting my garage to a dwelling area so that either him or my father in law could live with us if they needed to (I'm not heartless!!!).
Whilst my father is in good health, he gets increasingly confused and has asked for help to get his affairs in order whilst he is still fully lucid. He is the one that wants to share some of his savings to his 2 x kids as he knows the impact that this would make.
Regards
0 -
Your Father will have all of his IHT allowance (£325k plus £175k RNRB) £500k PLUS (assuming they were married and none of it has been used when she died) all of your Mother's allowance, another £500k.
The transfer needs to be processed within two years of the second death
"you send the request to HMRC within 2 years of the death of the surviving spouse or civil partner"
2 -
Not quite another £500k the value of the house would need to be £350k or more in order to be able to claim both RNRBs in full. That does not matter in this case as his NRB plus the transferable NRB covers the entire estate.
The 2 year limit to claim transferable NRB and RNRBis applies to the second death not the first one.
On another point, has he put lasting powers of attorney in place? If not that should be a priority especially for finance.
3 -
Ah thank you that clears it up!
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