Another Gifting from Income question

phlebas192

https://forums.moneysavingexpert.com/discussion/comment/82052954#Comment_82052954

Have previous gifts been linked to your salary? Have any past bonuses received been used to increase the amount gifted? Did you put in writing when you started gifting that the gifts would be related to your salary / bonuses? For a claim to be successful then the gifts need both be from surplus income but also look like part of your normal expenditure which is why your executors will need to be able to demonstrate a regular pattern of gifting.

FWIW, you won't lose anything by making the gift. Worst case is you die within 7 years in which case it will attract IHT at the same level as if you had not made it and it stayed in your estate. Or your executors might be successful in claiming it is a gift from excess income that forms part of your normal expenditure. Survive 7 years and there's no IHT anyway.

Dead_keen

Assume that you haven’t yet retired and your income can be shown to be in excess of your expenditure. If you maintain regular gifting, by means of an annual gift to your offspring and decide to vary that amount one year (eg for a house deposit) due to receiving a bonus from work, but otherwise continue with regular annual gifting. Given that you’ve established a pattern of regular giving, and can show that all gifting is from income, can the whole amount of the deposit fall under the gifting from income rule?

It depends. Let's say:

• No: you give £100 per month and then want to give a one-off £100,000 deposit, that deposit doesn't sound "normal" to me.
  
• Yes: you give £100 per month to each kid 1, kid 2 and kid 3. You decide that you want to give them all a deposit when they buy a house. Kid 1 buys a house and you give them £100,000. Kid 2 and kid 3 haven't bought a house yet so they get no cash yet. I could see that £100,000 being "normal" but the difficulty is that this is the first one and if you die shortly after, there won't be a second or third one. The way to deal with that is to create a contemporaneous note of your intention to create this pattern.

I like email for contemporaneous evidence, but in the old days you could write to your solicitor. I guess nowadays you could do a video on facebook, write it with drones in the sky and post the video on insta or whatever. Assuming email, you might say to your executor saying something like:

A quick update. I've financially helped the kids throughout their lives and I want to continue to do so. That's been through university, with driving lessons, £100 per month to help them with the cost of living, and so on. I want to keep doing this. It might be monthly support or when they have a pressing need for cash (e.g. they lose their jobs), to help them with fun experiences (holidays that they wouldn't necesarily afford), with a deposit for renting a flat or buying their own house, helping when they start a family and so on. Kid 1 is now at the buying-house stage and I have helped her with a deposit for her first house. So I gave her £100,000 today. Just to be clear that I want to be fair to all three, but I don't want to give kids 2 and 3 the money just yet as there is no sign of them buying a house. So I plan to give them the deposit as and when they buy a house. This could be next year or in a few years but the idea is that I plan to be fair to all the kids by helping them all our over time. You can find my updated gift schedule in the filing cabinet.

silvercar

Two kids, both have had help with deposits in the financial years when there were bonuses on salary that were in excess of the gifts. Both continue to receive annual gifts from income and the intention is for this to continue, at least until retirement.