Declaring Gifts from income when income mainly came from spouse?

itm2 · 19 May at 6:58PM

I'm handling the estate of my mother, and preparing form IHT403 to declare gifts made in the 7 years before she died.
Before my father died (at the end of 2019) my mother would give regular monthly gifts from income to my sister and I. The income which funded it, however, was largely from monthly payments from my father's pension (he always transferred any surplus funds from his monthly pensions to her account every month, after the monthly bills were settled from his account).
My mother had a state pension and a small occupational pension, but this would not have been enough the fund the monthly gifts.
Since the gifts that my mother was giving were not fully funded by her own income, does this mean that they cannot be regarded as gifts from her income? Or can my father's monthly payments to her be regarded as part of her income?

Keep_pedalling · 19 May at 10:54PM

It does not sound like shame had excess income so no you cannot claim those as exempt gifts on her estate. You could have claimed them against you father’s estate if he had made the gifts directly.

Do you actually need these exemptions to avoid or cut down IHT? Have you factored in the residential NRB and transferable NRBs which could give her estate up to £1M of exemptions?

itm2 · 19 May at 11:09PM

Keep_pedalling said:

It does not sound like shame had excess income so no you cannot claim those as exempt gifts on her estate. You could have claimed them against you father’s estate if he had made the gifts directly.

Do you actually need these exemptions to avoid or cut down IHT? Have you factored in the residential NRB and transferable NRBs which could give her estate up to £1M of exemptions?

Yes these exemptions are relevant as I have already factored in the NRB and residence NRB (including those passed on from my father).
The issue is that my father did not not make the gifts directly. He transferred all surplus income to my mother every month, who spent or saved/invested it as she wished.

Marcon · 19 May at 11:22PM

itm2 said:

I'm handling the estate of my mother, and preparing form IHT403 to declare gifts made in the 7 years before she died.
Before my father died (at the end of 2019) my mother would give regular monthly gifts from income to my sister and I. The income which funded it, however, was largely from monthly payments from my father's pension (he always transferred any surplus funds from his monthly pensions to her account every month, after the monthly bills were settled from his account).
My mother had a state pension and a small occupational pension, but this would not have been enough the fund the monthly gifts.
Since the gifts that my mother was giving were not fully funded by her own income, does this mean that they cannot be regarded as gifts from her income? Or can my father's monthly payments to her be regarded as part of her income?

HMRC does not treat a gift of cash as income.

What sort of amounts are talking about here?

Keep_pedalling · 19 May at 11:35PM

itm2 said:

Keep_pedalling said:

It does not sound like shame had excess income so no you cannot claim those as exempt gifts on her estate. You could have claimed them against you father’s estate if he had made the gifts directly.

Do you actually need these exemptions to avoid or cut down IHT? Have you factored in the residential NRB and transferable NRBs which could give her estate up to £1M of exemptions?

Yes these exemptions are relevant as I have already factored in the NRB and residence NRB (including those passed on from my father).
The issue is that my father did not not make the gifts directly. He transferred all surplus income to my mother every month, who spent or saved/invested it as she wished.

Exempt gifts from income must come from excess income (anything left over after normal expenditure) The money your father gave to your mother cannot be classed as part of her income so with just small pensions it is highly unlikely that she had any excess income and this gifts will be classed as failed PETs.

itm2 · 20 May at 10:20AM

Thanks for the advice. The gifts amounted to £4-5k per year in total. I'll declare them as normal gifts.

Keep_pedalling · 20 May at 10:39AM

itm2 said:

Thanks for the advice. The gifts amounted to £4-5k per year in total. I'll declare them as normal gifts.

You only have to declare the amount over her annual allowance of £3000 unless you have already accounted for that. So if she gave £1000 to 4 separate people you would only have to declare one of them, which might help you with the problem of the length of your gift list on your other thread.

In addition, if anyone received total gifts £250 or less they are exempt so you don’t need to include those either.

itm2 · 20 May at 10:58AM

Keep_pedalling said:

itm2 said:

Thanks for the advice. The gifts amounted to £4-5k per year in total. I'll declare them as normal gifts.

You only have to declare the amount over her annual allowance of £3000 unless you have already accounted for that. So if she gave £1000 to 4 separate people you would only have to declare one of them, which might help you with the problem of the length of your gift list on your other thread.

Actually that helps quite alot - I didn't realise that only gifts in excess of the £3000 limit needed to be declared (I mistakenly thought that, if the total amount exceeded £3k, I would need to list all of them)

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Declaring Gifts from income when income mainly came from spouse?

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