planning IHT

sneekymum

let me be 100% clear here can a parent gift significant sums away to children with no tax implications i.e. no gift/transfer taxes or income tax implications?
Yes - but it must be cash - as other assets may have grown tax-free since the first owner (not necessarily a parent) acquired them and would trigger a Capital Gains Tax charge on the giver not the receiver. You can give stuff that's not cash - you just have to pay any CGT on it that's all.

If this is the case why is IHT ever paid (voluntarily)? IHT is only due on a death. In probate the executors are asked to list all assets including gifts in the last seven years. Would you risk prison by signing to declare you did not receive such a gift?

Also if this is the case are the rules for cash give aways different to that of gifting a PPR? (Private Personal Residence? - I'm not very good at initials) - yes the rules are different because of your next question.

Finally, I assume if you gift something you can not then go on to have a benefit from that cash or asset....is this correct? - That's the one. Not just a house either - mothe can't put her car in your name and them continue to be the main driver (even a lesser driver, probably). Of course these considerations only apply for those whose estate are over the £275k threshold. To overcome the pre-owned asset rules a market rent (not a token one) should be paid to the new owner who must declare it on a tax return and probably pay income tax on it.

klondyke

sneekymum wrote:

let me be 100% clear here can a parent gift significant sums away to children with no tax implications i.e. no gift/transfer taxes or income tax implications?
Yes - but it must be cash - as other assets may have grown tax-free since the first owner (not necessarily a parent) acquired them and would trigger a Capital Gains Tax charge on the giver not the receiver. You can give stuff that's not cash - you just have to pay any CGT on it that's all.

Don't forget the £3000 pa allowance and, the oft forgotten 'regular gifts' made out of income - ie not drawing on capital. These can include insurance premiums, not least to cover a potential IHT liability, school fees for the grandchildren, holidays, help with bills, regular dollops of 'pocket money'. Main thing is that these gifts should not be seen to affect your savings. In these circumstances there can be merit in taking more income than you need for your own purposes from investments such as income bonds, so that there is a surplus available for such gifts. Having said that, it goes agains all the principles of MSEing insofar as our natural instinct is to reinvest surplus income, but where IHT is concerned and provided one doesn't leave oneself short, there seems little point in accumulating savings at, say 5-10%, to be taxed at 40%.