Inheritance Tax - paid to solicitor?

Hi,

I am a male and my dad favours my 2 sisters (boo hoo me).

He has secretly given them a LOT of money over the years, probably staying within the limits. I understand these to be that he and my mum can give £3000 EACH? to a child per year, so each sister can get £6000 a year with no affect to the inheritance tax. Please can someone confirm.

I have had nothing, and now want help with a house purchase. I asked him for £150,000 even as a loan. Found out that he gave double this to my sisters a few years back and paid it directly to their solicitor. He is making a big deal that the money has to go directly to the solicitor.

I don't know much about this stuff. Is he saying this to stick his nose in my business (he is a control freak), or has he found a way around the inheritance tax by doing this, and is it legal?!!!

Would it make any difference if we just stuck to a loan?

Thanks.

(PS, I know this is not exactly 3rd world problems)

Comments

  • xylophone
    xylophone Posts: 44,140
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    edited 21 February 2019 at 6:15PM
    He has secretly given them a LOT of money over the years, probably staying within the limits. I understand these to be that he and my mum can give £3000 EACH? to a child per year, so each sister can get £6000 a year with no affect to the inheritance tax.

    No. See below.


    https://www.gov.uk/inheritance-tax/gifts

    I have had nothing, and now want help with a house purchase. I asked him for £150,000 even as a loan. Found out that he gave double this to my sisters a few years back and paid it directly to their solicitor. He is making a big deal that the money has to go directly to the solicitor.
    If he was making a gift to the sisters then it was a gift, regardless of whether or not it was paid to their solicitors.
    Would it make any difference if we just stuck to a loan?

    If you take a loan from your father as the deposit for a house, this could lead to problems with getting a mortgage.

    Your father could give you the deposit for a house and confirm this to the mortgagee.

    The gifts your father/mother make are "potentially exempt transfers".

    https://www.which.co.uk/money/tax/inheritance-tax/inheritance-tax-planning-and-tax-free-gifts-aw1mb2n7snwx
  • 00ec25
    00ec25 Posts: 9,123
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    each sister could receive £6,000 per year if that money came out of a JOINT bank account in the name of both your mother and father since that way each parent is using their own 3,000 limit.

    if the money comes from a bank in father's sole name then the limit would be 3,000 obviously


    as for paying it to a solicitor I suspect your bitterness is causing you to see problems that do not exist.
    Just as likely the solicitor prefers that the money comes direct to them from its actual source, your father/parents, rather than having to go through the extra admin of establishing that the sister paid to the solicitor form sister's bank account and then proving that sister got the money from father, ie the requirements imposed on a solicitor by the money laundering regulations requiring the solicitor to establish the source of the money. Much easier just to get it from the horse's mouth, direct from father.
  • p00hsticks
    p00hsticks Posts: 12,671
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    00ec25 wrote: »
    each sister could receive £6,000 per year if that money came out of a JOINT bank account in the name of both your mother and father since that way each parent is using their own 3,000 limit.


    The 3000 tax exempt limit is a TOTAL any one person can give - not per recipient. So with two sisters, then the mother and father could only give £1500 to each.



    Of course you can give as much as you like to whoever you like as long as you ensure that you estate can potentially pay the tax if you die within seven years.
  • Thanks for replies, although I am still confused as they seem to conflict?

    So if my mum and dad have separate bank accounts (or joint in both names), each parent can give £3000 to a child in one tax year, meaning total of £6000.

    I also read that if nothing is 'gifted' the previous year, they can give this too for one time, so potentially £12000 for just one time, and in next tax year £6000?

    I guess what I am asking is whether there is a way around paying inheritance tax (if they die within 7 years of gift) on a larger one-off amount and the answer seems to be no?
  • Mojisola
    Mojisola Posts: 35,551
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    pam21 wrote: »
    So if my mum and dad have separate bank accounts (or joint in both names), each parent can give £3000 to a child in one tax year, meaning total of £6000.

    I also read that if nothing is 'gifted' the previous year, they can give this too for one time, so potentially £12000 for just one time, and in next tax year £6000?

    I guess what I am asking is whether there is a way around paying inheritance tax (if they die within 7 years of gift) on a larger one-off amount and the answer seems to be no?

    As said above, each parent can give away up to £3000 per year without it affecting IHT - not £3000 to several different people.

    If there is IHT to pay on the total estate, it is paid by the estate, not the person who received the money (except in rare circumstances where there isn't enough left in the estate to pay the bill).
  • xylophone
    xylophone Posts: 44,140
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    Individuals are entitled to give away £3000 in total in any tax year - the allowance can be backdated one year so that if it is not used in one tax year it can be carried forward to the next.

    A married couple could give away a total of £6000 to their children in any one tax year (or £12000 if the previous year's allowances were unused).

    Details are here

    https://www.gov.uk/inheritance-tax/gifts
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