Inheritance Tax on gift-who pays it?
Discussion
If an elderley (90yr old) relative gifted me a substantial sum and then died before the 7yr potentially exempt transfer rule then who would pay the inheritance tax-me or his estate?The gift would be over the inheritance tax threshold in itself and there would be funds left in his estate to pay the inheritance tax on it if he didnt survive the 7yr period for PET.
MarsellusWallace said:
Thanks Eric.
If the relative died first then left me that same ammount in his will then would his estate still pay the tax or would I have to pay it?
Same answer as before. The fist call would normally be on the estate - but if the estate hasn't got the funds, HMRC will chase whoever has.If the relative died first then left me that same ammount in his will then would his estate still pay the tax or would I have to pay it?
Hmmm, not strictly true. The recipient can be responsible but if no longer has it, then the estate would pick up the liability. Ordinarily, a will would make reference to previous gifts and state that estate would pick up the tab (if that is what the donor wanted).
A lot depends on the position of the remaining estate.
HMRC have an example on their site:
"Here are some examples of when a beneficiary or donee might have to pay Inheritance Tax.
Example one
If someone gives you a gift and they do not survive for seven years after making the gift, you would only be liable to pay Inheritance Tax on that gift if the value of the estate - including the gift - is over the Inheritance Tax threshold (£325,000 in 2011-12 tax year) and there is not enough money in the estate to pay the Inheritance Tax.
[b] The above is in line with comments already made, but the revenue go on to say:
[/b]
"However, if all the gifts made by that person during the seven years before they died add up to more than the Inheritance Tax threshold (£325,000 in 2011-12 tax year) - just the gifts themselves not the rest of the estate - Inheritance Tax will be due on all of the gifts that brought the total above the threshold. In this case, you as the donee will usually have to pay the tax due on your gift".
A lot depends on the position of the remaining estate.
HMRC have an example on their site:
"Here are some examples of when a beneficiary or donee might have to pay Inheritance Tax.
Example one
If someone gives you a gift and they do not survive for seven years after making the gift, you would only be liable to pay Inheritance Tax on that gift if the value of the estate - including the gift - is over the Inheritance Tax threshold (£325,000 in 2011-12 tax year) and there is not enough money in the estate to pay the Inheritance Tax.
[b] The above is in line with comments already made, but the revenue go on to say:
[/b]
"However, if all the gifts made by that person during the seven years before they died add up to more than the Inheritance Tax threshold (£325,000 in 2011-12 tax year) - just the gifts themselves not the rest of the estate - Inheritance Tax will be due on all of the gifts that brought the total above the threshold. In this case, you as the donee will usually have to pay the tax due on your gift".
Edited by ukshooter on Tuesday 26th April 20:35
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