Parent 'gifting' amount to son/daughter
Discussion
Just after a bit of basic advice on a possible 'situation'
parent sold house and had approx 180k to bank - he has already put 50k into premium bonds and is not happy about having
remaining 130k in savings account (not confident with money/banks and wants to remove 'potential' for frittering away amount)
whats the position with parent 'gifting' 50k to son/daughter (to also set up two more premium bond accounts in their own name)
from a basic tax angle ?
Parents total estate value is 180k so seems below any issues from inheritance tax, but is there any tax liability to son/daughter,
or is it even possible to gift 50k in one lump sum?.
if anyone can offer advice that would be very welcome
Thanks - Tb
parent sold house and had approx 180k to bank - he has already put 50k into premium bonds and is not happy about having
remaining 130k in savings account (not confident with money/banks and wants to remove 'potential' for frittering away amount)
whats the position with parent 'gifting' 50k to son/daughter (to also set up two more premium bond accounts in their own name)
from a basic tax angle ?
Parents total estate value is 180k so seems below any issues from inheritance tax, but is there any tax liability to son/daughter,
or is it even possible to gift 50k in one lump sum?.
if anyone can offer advice that would be very welcome
Thanks - Tb
It becomes a Potentially Exempt Transfer (PET) for IHT purposes which means the parent has to survive 7 years for the money to be fully exempt.
If the value of the estate is below the IHT threshold at the point of death within 7 years (when the PET is added to the estate value) then this would not create a tax issue.
It is only when the PET reduces the value of the estate in a way that avoids or diminishes any IHT payable that this becomes a problem.
If the value of the estate is below the IHT threshold at the point of death within 7 years (when the PET is added to the estate value) then this would not create a tax issue.
It is only when the PET reduces the value of the estate in a way that avoids or diminishes any IHT payable that this becomes a problem.
Top Banana said:
he has already put 50k into premium bonds
'gifting' 50k to son/daughter to also set up two more premium bond accounts in their own name
Julian's covered the basic tax point.'gifting' 50k to son/daughter to also set up two more premium bond accounts in their own name
Please make sure everyone fully understands just how poor the returns are from Premium Bonds these days. I'll invest in almost anything but I won't touch Premium bonds with a barge pole. There's a 99% chance you'll just be watching your money shrink with inflation.
Thanks guys for the reply's
I get the message regarding return on premium bonds not being best investment opportunity, but the reason son/daughter are
looking at this is that they effectively just want to 'park' the 50k each and be able to access it quickly if the parent
suddenly needs the funds for care, etc..
I get the message regarding return on premium bonds not being best investment opportunity, but the reason son/daughter are
looking at this is that they effectively just want to 'park' the 50k each and be able to access it quickly if the parent
suddenly needs the funds for care, etc..
CAPP0 said:
Whilst I'm not suggesting that you are doing this, I believe that if the parent who sold the house has to go into care any time soon, they will look quite closely at the fact that the house was sold and a big chunk gifted off.
Hence the idea of the Son / Daughter just 'parking' this 50k into premium bonds - it wont be theirs to spend but justa convenient way to keep the amount from being frittered by an elderly parent. As highlighted in original post the parent
is not that savvy about keeping tabs on 130k of funds and trusts son/daughter to look after a certain amount better than he can.
The care aspect is a possible concern in the future but expected to be another 5-6 years before a real possibility
Not sure if this changes any potential advice...
Many thanks for all comments so far - T.b.
Top Banana said:
Thanks guys for the reply's
I get the message regarding return on premium bonds not being best investment opportunity, but the reason son/daughter are
looking at this is that they effectively just want to 'park' the 50k each and be able to access it quickly if the parent
suddenly needs the funds for care, etc..
As long as they are aware that it is only the face value that is "parked" and that the spending power of this is being eroded by inflation each and every year (which has a huge compounding effect) then this is great.I get the message regarding return on premium bonds not being best investment opportunity, but the reason son/daughter are
looking at this is that they effectively just want to 'park' the 50k each and be able to access it quickly if the parent
suddenly needs the funds for care, etc..
I would be looking at something that could at least keep up with (or beat) inflation though. This would involve a degree of risk, though you could argue that the risk of losing to inflation is guaranteed when compared to any risk involved in keeping up with it (or ahead of it) is factored in.
Over the last 7 years (just to use the PET time frame) you would have needed £50k to grow by c. £20k - to just keep up with inflation.
This would have required a 5% (after tax and charges) average annual return each year.
Less than this and you/they are losing money all the time.
A decent defensive investment could have done this at less risk than the guaranteed inflation loss.
Obviously, short term or emergency funds should be held in cash or very defensive equivalents though.
Basically, returns change over different investment cycles, but it is rare that cash (this includes Premium Bonds) is the best asset to commit to. It certainly has a purpose though.
Pat H said:
Planning on getting divorced?
Nope, neither was I.
Worth reflecting upon whether there is any risk of the "gift" disappearing in a puff of smoke along with your ex....
Someone more knowledgeable may answer this point but, as I understood it, in Scotland anyway depends on if/what an inheritance is used for affects whether or not It’s in the pot for splitting. In event of divorce.Nope, neither was I.
Worth reflecting upon whether there is any risk of the "gift" disappearing in a puff of smoke along with your ex....
If funds are just parked & not used to pay off s mortgage or something that may remain protected
rockin said:
Top Banana said:
he has already put 50k into premium bonds
'gifting' 50k to son/daughter to also set up two more premium bond accounts in their own name
Julian's covered the basic tax point.'gifting' 50k to son/daughter to also set up two more premium bond accounts in their own name
Please make sure everyone fully understands just how poor the returns are from Premium Bonds these days. I'll invest in almost anything but I won't touch Premium bonds with a barge pole. There's a 99% chance you'll just be watching your money shrink with inflation.
JulianPH said:
Over the last 7 years (just to use the PET time frame) you would have needed £50k to grow by c. £20k - to just keep up with inflation.
This would have required a 5% (after tax and charges) average annual return each year.
Less than this and you/they are losing money all the time.
If inflation is (say) 2% why does it take 5% return every year to keep up with it?This would have required a 5% (after tax and charges) average annual return each year.
Less than this and you/they are losing money all the time.
Compounding I understand - but the 5% is being compounded too...
Simpo Two said:
JulianPH said:
Over the last 7 years (just to use the PET time frame) you would have needed £50k to grow by c. £20k - to just keep up with inflation.
This would have required a 5% (after tax and charges) average annual return each year.
Less than this and you/they are losing money all the time.
If inflation is (say) 2% why does it take 5% return every year to keep up with it?This would have required a 5% (after tax and charges) average annual return each year.
Less than this and you/they are losing money all the time.
Compounding I understand - but the 5% is being compounded too...
https://www.bankofengland.co.uk/monetary-policy/in... suggests 2.5% pa if you pop 50k in for 2012 and check value in 2019
rockin said:
Julian's covered the basic tax point.
Please make sure everyone fully understands just how poor the returns are from Premium Bonds these days. I'll invest in almost anything but I won't touch Premium bonds with a barge pole. There's a 99% chance you'll just be watching your money shrink with inflation.
I understand that point....but equally, one could argue that we are really overdue some market correction, and that 50k in premium bonds might very possibly worth more than <insert preferred alternative risk-based investment> in 1-2 years!Please make sure everyone fully understands just how poor the returns are from Premium Bonds these days. I'll invest in almost anything but I won't touch Premium bonds with a barge pole. There's a 99% chance you'll just be watching your money shrink with inflation.
If the long term plan was to leave it there, I’d be less keen...but my bonds last year managed about 3%. This year it will probably do 0.2%
Who knows, eh!They are not a great investment on average, but not terrible either. They are risk free, tax free, whilst not impacting on the savings, protection guarantee for any financial institution. The average is 1.4 percent which is up to 2.55 percent equivalent and there is always the tiny chance of something more.
NSI offer more than just premium bonds - all backed by the government.
https://www.nsandi.com/our-products
As a result I don't see any need to 'gift' with all the potential trouble that might bring.
https://www.nsandi.com/our-products
As a result I don't see any need to 'gift' with all the potential trouble that might bring.
El stovey said:
I think the attraction for some is just to have 50k readily available somewhere safe that isn’t a bank. I know you get savings protection in banks but that’s my understanding.
Exactly. We have 4 x £50k between us and our daughters which will be used as cash to put towards purchasing a new house in a few years before being restocked. mikeiow said:
Simpo Two said:
JulianPH said:
Over the last 7 years (just to use the PET time frame) you would have needed £50k to grow by c. £20k - to just keep up with inflation.
This would have required a 5% (after tax and charges) average annual return each year.
Less than this and you/they are losing money all the time.
If inflation is (say) 2% why does it take 5% return every year to keep up with it?This would have required a 5% (after tax and charges) average annual return each year.
Less than this and you/they are losing money all the time.
Compounding I understand - but the 5% is being compounded too...
https://www.bankofengland.co.uk/monetary-policy/in... suggests 2.5% pa if you pop 50k in for 2012 and check value in 2019
The really embarrassing thing is, knowing very well what inflation has been, I didn't even sense check the figure it chucked out!
Pat H said:
Planning on getting divorced?
Nope, neither was I.
Worth reflecting upon whether there is any risk of the "gift" disappearing in a puff of smoke along with your ex....
Maybe the parents could donate a Power Of Attorney to the children to avoid this situation. The kids can then still manage the cash but it stays in the parents name.Nope, neither was I.
Worth reflecting upon whether there is any risk of the "gift" disappearing in a puff of smoke along with your ex....
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