cash gift rules

badboyblue

Hi
My dad recently died leaving my mum with a total worth significantly above the IHT threshold (£600k as I read it).
Obviously I have suggested her "gifting" me the excess as the easiest way to get around the threat of a potential large contribution to the tresury, I understand the 7 year tapering rule for gifts (ish) - questions:-

How do you record the date of the gift?

Can a "gift" be any amount, ie are 6 figure sums OK or do people start to get suspicious?

If she needs any money back in future, is that simply a gift from me to her or are there rules on "tempory gifts"?

TIA
BBB

badboyblue

Hey, I came here for a bit of advice - I get ignored enough at home!!!:D

Have I posted in the wrong area?

Murdina

Anything your dad left your mum is exempt from IHT. When your mum dies, she will get the benefit of her nil rate band and also any unused nil rate band he had - which will be all of it if he left all to her.
That may be 600k in today's terms - it may be much more than that when she dies.
She can gift you anything she wants - the first 3k in any year is free of IHT whatever and you can use the previous year's allowance if unused.
Beyond that, if she lives for 7 years, the gift is free of IHT.
If she dies within 7 years, then the gift becomes chargeable. The IHT nil rate band is used first against lifetime gifts so most likely that will cover them. Remaining death estate then charged in usual way. Point being that unless she has given away more than nil rate band in her lifetime the taper point you have discovered does not kick in.
If her estate is as big as you imply, arrange for her to see a solicitor, accountant or chartered tax adviser who specialises in IHT. There are a lot of issues to consider. In particular, there are rules about gifts with reservation of benefit and rules on preowned assets which might eventually catch you out if she needs the money back at some point. Or indeed HMRC might argue there was no gift at all.
I'm not sure how to put this diplomatically but you seem to have expected a posting in the small hours to produce an instant reply on a complex issue. I use my specialist knowledge to help others, as many others do here, out of pure goodwill, and we do have other things to do with our lives. Please be reasonable in your expectations.

badboyblue

Murdina wrote: »

Anything your dad left your mum is exempt from IHT. When your mum dies, she will get the benefit of her nil rate band and also any unused nil rate band he had - which will be all of it if he left all to her.
That may be 600k in today's terms - it may be much more than that when she dies.
She can gift you anything she wants - the first 3k in any year is free of IHT whatever and you can use the previous year's allowance if unused.
Beyond that, if she lives for 7 years, the gift is free of IHT.
If she dies within 7 years, then the gift becomes chargeable. The IHT nil rate band is used first against lifetime gifts so most likely that will cover them. Remaining death estate then charged in usual way. Point being that unless she has given away more than nil rate band in her lifetime the taper point you have discovered does not kick in.
If her estate is as big as you imply, arrange for her to see a solicitor, accountant or chartered tax adviser who specialises in IHT. There are a lot of issues to consider. In particular, there are rules about gifts with reservation of benefit and rules on preowned assets which might eventually catch you out if she needs the money back at some point. Or indeed HMRC might argue there was no gift at all.
I'm not sure how to put this diplomatically but you seem to have expected a posting in the small hours to produce an instant reply on a complex issue. I use my specialist knowledge to help others, as many others do here, out of pure goodwill, and we do have other things to do with our lives. Please be reasonable in your expectations.

First thanks for the answer above - outstanding is the issue of how you record the date of a gift?

There's no need to be diplomatic, I appreciate you putting in the time to answer my question - but it had been on all day and was the last one at the very very bottom on "page 1" so I "bumped" it up the order - I used a smiley to try and convey that my comments were not entirely serious.

CLAPTON

how much in total?
how much is cash or near cash?

from your comments I think you don't understand taper relief

what exactly are you trying to achieve? do you need the money now ... or simply trying to avoid IHT or what?

are you the only beneficary?

is your mother in ill health and likely to die in the next 7 years?

there is the possibility of varying the provisions of the will so the money goes directly to you... but this can have disadvantages too.

as far as recording the time of any gift then make sure you keep your bank statements ... that will be sufficient

badboyblue

CLAPTON wrote: »

how much in total?
how much is cash or near cash?

from your comments I think you don't understand taper relief

what exactly are you trying to achieve? do you need the money now ... or simply trying to avoid IHT or what?

are you the only beneficary?

is your mother in ill health and likely to die in the next 7 years?

there is the possibility of varying the provisions of the will so the money goes directly to you... but this can have disadvantages too.

as far as recording the time of any gift then make sure you keep your bank statements ... that will be sufficient

I'd rather not go into specifics but the following will give a working understanding of what we're talking about:-
Leaving Mum with her house and together with pensions sufficient capital to have an an income after tax of around 20k pa there is say 250k "excess". It is this I propose she gift me.

Taper relief is the reducing consideration to the taxman should mum die during a Seven year period from date of gift? I thought??

Firstly she wants to give me something but as to the amount, yes trying to get as much money as possible out of Mums estate, while leaving her a good income, is of course a consideration - (realistically don't see Mum ever needing any of the money she gives me) - yes the effect of this would reduce any possible IHT on her death, .

I am an only Child and will recieve everything on Mums death. She is in her mid 60s and to the best of our knowledge fit as a fiddle - but so was Dad 12 hours before he died.
Changing the will I thought would freeze Dads tax free element at 300K whereas in a few years time his "share" of mums threshold would be worth 50k more? So Really thought the gift route was easiest - cheapest & legal?

I am more than open to any suggestions, particularly around the legality aspect - don't want to inadvertantly break any rules - conversely don't really want to splurge a few grand for an accountant to say "yes that's fine" (I'm sure some of you are accountants but you know what I mean!!) - unless the consensus is we should of course.

CLAPTON

Assuming the estate is worth 825,000.

There is no gift tax in the UK.
She (or anyone else for that matter) can legally give you any amount they like.

There is however the IH tax issues.
Reread what murdina says about taper relief... basically it doesn't operate if you're given 250,000 so forget it.
So if your mum dies within 7 years the 250,000 will be included in her estate for IHT purposes. However it may well be that the IHT allowance is very near that figure then.

Also, remember although you may not be better off by the gift now you're not worse off (IHT wise that is).

You mention the possibility of paying back the money if needed ... this would indeed be a gift with reservation and would invalidate the gift for IHT purposes.

badboyblue

CLAPTON wrote: »

Assuming the estate is worth 825,000.

There is no gift tax in the UK.
She (or anyone else for that matter) can legally give you any amount they like.

There is however the IH tax issues.
Reread what murdina says about taper relief... basically it doesn't operate if you're given 250,000 so forget it.
So if your mum dies within 7 years the 250,000 will be included in her estate for IHT purposes. However it may well be that the IHT allowance is very near that figure then.

Also, remember although you may not be better off by the gift now you're not worse off (IHT wise that is).

You mention the possibility of paying back the money if needed ... this would indeed be a gift with reservation and would invalidate the gift for IHT purposes.

Thanks - now I'm confused:-
??? How am I reading this wrong??

http://www.hmrc.gov.uk/CTO/customerguide/page13-1.htm

I said I think it unlikely mum would ever need any of the money back - for her day to day needs she has more than enough money - I'm talking extraordinary requirements i.e. Let's say at 75 she needs a new hip - I could afford to give her the money to jump the NHS queue irrespective of whether she gave me money 10 years earlier or not - it's what anyone would do for their mum if they could afford it?
Are you suggesting this would be against gift rules?

EDIT
Scrap the first bit - the penny has dropped!!! Gifts will be counted first - when totting up an estate - Yes???
Ta

CLAPTON

if the gift was given on the assumption that it could be returned upon demand then it is a gift with reservation.
But common sense says that this isn't a practical problem.. even if you paid for your mum's new hip in ten years time who would know anyway or who can say you didn't just decide to do that at the time.
Nobodies out there counting


And yes, the gifts are counted first.. it's very confusing and I'm sure many people initially think exactly as you did (including myself I have to say).

Hope your mum lives to a ripe old age and doesn't need that new hip.

badboyblue

CLAPTON wrote: »

if the gift was given on the assumption that it could be returned upon demand then it is a gift with reservation.
But common sense says that this isn't a practical problem.. even if you paid for your mum's new hip in ten years time who would know anyway or who can say you didn't just decide to do that at the time.
Nobodies out there counting


And yes, the gifts are counted first.. it's very confusing and I'm sure many people initially think exactly as you did (including myself I have to say).

Hope your mum lives to a ripe old age and doesn't need that new hip.

Thanks again - my worry is there is someone out there counting! As I said there is no intention of trying to pull a flanker re the gift rules - but just want to be sure change of circumstance is an acceptable reason for money going the other way in future.

It is confusing, at least for me - but when you read what it actually says it's as plain as day!!

Ta
BBB

Murdina

Can I just add one point. Assume that it's not a new hip but a home you have to buy your mum or some other asset. This will be caught by the rules on preowned assets and an annual income tax charge would be due.
I strongly recommend that if you are looking at 6 figure sums you take legal advice. Where would your mum be if you were to be divorced (if you are or are ever likely to marry or enter a civil partnership) or if you were unfortunately made bankrupt? Or indeed if you died and the money passed on to your heirs? She is relying on your trust but you may not be able to or be around to follow that up if any of the above happen.
IHT planning is about the whole family and other heirs, not just the person who is giving money away now.
Good luck!!