Mother gifts £400K to daughter
Discussion
Quick hypothetical question for those that know, if my mother-in-law gifts my wife £400K, which she then uses towards the purchase of a property, is there any tax liability after her mother passes away?
Assuming of course that she passes away at least 7 years after gifting the money, thereby avoiding IHT.
And would the outcome change at all if after gifting the money she were to move into the property with us?
Assuming of course that she passes away at least 7 years after gifting the money, thereby avoiding IHT.
And would the outcome change at all if after gifting the money she were to move into the property with us?
Well the idea of her potentially moving in with us would be to avoid any need for a care home or residential care, or at least that’s the thinking.
Would just hate to find out in 10 years time that my wife and I would be liable for anything if her mum were to pass away, although her mum would be more put out than us in fairness, prior to her own passing of course!
I’m happy to pay for a solicitor for a definitive answer if need be but thought I’d ask on here first.
Never really dealt with IHT previously but the 7 year thing seems fairly easy to understand, and the sliding scale if she were to pass away after 3-4 years.
Would just hate to find out in 10 years time that my wife and I would be liable for anything if her mum were to pass away, although her mum would be more put out than us in fairness, prior to her own passing of course!
I’m happy to pay for a solicitor for a definitive answer if need be but thought I’d ask on here first.
Never really dealt with IHT previously but the 7 year thing seems fairly easy to understand, and the sliding scale if she were to pass away after 3-4 years.
Best laid plans etc. Even if you intend to be her "carer" for the rest of her life - often circumstances preclude the original plan from being followed through.
And then your careful use of "gifts" might come back and bite you.
You definitely need to talk to an expert in wealth and estate planning (which I am not).
And then your careful use of "gifts" might come back and bite you.
You definitely need to talk to an expert in wealth and estate planning (which I am not).
Eric Mc said:
If she survives 7 years, there are no IHT implications. This is assuming there is no reservation of title regarding the gift.
There may be other ramifications relating to non tax matters - such as care home funding, for instance.
Happened to my fathers friend a few years ago he sold his house for nearly a £1m and moved into a rented apartment he gave each son just over £300k. They got it drawn up with a solicitor in such a way that even when the father died they wouldn't pay a penny. The father died within 3 years but they never paid a penny and the estate was worth a good bit more than that.There may be other ramifications relating to non tax matters - such as care home funding, for instance.
From memory I think he sold them a stake in the property for a nominal fee or a similar scheme but it was all legal and above board.
The 7 years only applies to IHT, there’s no defined term to get assets excluded from the estate to avoid paying care fees. It’s down to the local council.
If you’re giving funds away to minimise IHT, that may be a reasonable reason to make the gift. If giving away assets that would be within the annual IHT exemption less so & potentially they could still be assessed as hers and taken into account.
If you’re giving funds away to minimise IHT, that may be a reasonable reason to make the gift. If giving away assets that would be within the annual IHT exemption less so & potentially they could still be assessed as hers and taken into account.
Think our biggest concern was whether or not her living with us would effect her estate further down the line as at that point she wouldn’t own a property and would have very few assets.
Her exact words during a recent discussion, “I’d rather die than end up in a care home”.
And she means it. She has failing eyesight and is likely to lose virtually all vision in the next few years, also has COPD and angina. Taking her with us will allow us to care for her and ensure she at least has a decent quality of life, plus access to her grand-kids too.
It’s a massive step for us all but we’re trying to facilitate it as we believe it’s best for the whole family. Apparently it’s far more common a scenario abroad than it is here but she’ll have her own annexe and facilities, and us within shouting distance.
Her exact words during a recent discussion, “I’d rather die than end up in a care home”.
And she means it. She has failing eyesight and is likely to lose virtually all vision in the next few years, also has COPD and angina. Taking her with us will allow us to care for her and ensure she at least has a decent quality of life, plus access to her grand-kids too.
It’s a massive step for us all but we’re trying to facilitate it as we believe it’s best for the whole family. Apparently it’s far more common a scenario abroad than it is here but she’ll have her own annexe and facilities, and us within shouting distance.
ellroy said:
The 7 years only applies to IHT, there’s no defined term to get assets excluded from the estate to avoid paying care fees. It’s down to the local council.
If you’re giving funds away to minimise IHT, that may be a reasonable reason to make the gift. If giving away assets that would be within the annual IHT exemption less so & potentially they could still be assessed as hers and taken into account.
So you are saying it's better / safer for the MIL to sell the house and distribute the proceeds rather than give the house to daughter who then sells?If you’re giving funds away to minimise IHT, that may be a reasonable reason to make the gift. If giving away assets that would be within the annual IHT exemption less so & potentially they could still be assessed as hers and taken into account.
inheritance tax comes from the deceased estate not the person receiving it.
It is 7 years, but it’s amount of tax is tapered - look it up.
An individual has about 300k, if they were married and the partner died and passed everything to the surviving parter then you can combine their iht amount too.
If a property is passed to siblings at death, there’s about another 150k allowance.
So potentially around 700k before any iht is due depending on circumstances
It is 7 years, but it’s amount of tax is tapered - look it up.
An individual has about 300k, if they were married and the partner died and passed everything to the surviving parter then you can combine their iht amount too.
If a property is passed to siblings at death, there’s about another 150k allowance.
So potentially around 700k before any iht is due depending on circumstances
As above, tread carefully, as local authorities really dislike intentional deprivation of assets when they see their money going sideways 
Best case scenario, you and your family provide all the care for 7yrs + , no HMRC flags raised, no local authority flags raised, job jobbed.
Worst case, she deterioriates to the point that you CANNOT provide care, and she comes into the purview of the local authority, wanting to know where the house sale money went.
Suggest she retains enough money to rent the annexe
Best case scenario, you and your family provide all the care for 7yrs + , no HMRC flags raised, no local authority flags raised, job jobbed.
Worst case, she deterioriates to the point that you CANNOT provide care, and she comes into the purview of the local authority, wanting to know where the house sale money went.
Suggest she retains enough money to rent the annexe
Duly noted. She will still have about £300K available to her anyway if the worst did happen, but obviously we all hope it won’t come to that.
Perhaps she can rent and then I get get my own parents in too and they can rent as well. Family rates obviously, but no need to work then.
I’ll suggest it to the wife.
Perhaps she can rent and then I get get my own parents in too and they can rent as well. Family rates obviously, but no need to work then.
I’ll suggest it to the wife.
HRL said:
Think our biggest concern was whether or not her living with us would effect her estate further down the line as at that point she wouldn’t own a property and would have very few assets.
Her exact words during a recent discussion, “I’d rather die than end up in a care home”.
And she means it. She has failing eyesight and is likely to lose virtually all vision in the next few years, also has COPD and angina. Taking her with us will allow us to care for her and ensure she at least has a decent quality of life, plus access to her grand-kids too.
It’s a massive step for us all but we’re trying to facilitate it as we believe it’s best for the whole family. Apparently it’s far more common a scenario abroad than it is here but she’ll have her own annexe and facilities, and us within shouting distance.
Don’t underestimate how much effort is involved in looking after parents in their last years!Her exact words during a recent discussion, “I’d rather die than end up in a care home”.
And she means it. She has failing eyesight and is likely to lose virtually all vision in the next few years, also has COPD and angina. Taking her with us will allow us to care for her and ensure she at least has a decent quality of life, plus access to her grand-kids too.
It’s a massive step for us all but we’re trying to facilitate it as we believe it’s best for the whole family. Apparently it’s far more common a scenario abroad than it is here but she’ll have her own annexe and facilities, and us within shouting distance.
Like you, we thought it would be a good idea to turn our large attached garage into an annex for my parents a few years back.
Thank god we didn’t. There is no way we would be able to care for my mother the way she has been over the last 18 months or so. She has acute dementia. She cannot feed herself, has even lost the ability to chew food, so liquids only.
It takes people with years of experience to look after someone in her condition.
Also she would be horrified if she thought she was being a burden to anyone.
Good luck if you go ahead with it.
eliot said:
inheritance tax comes from the deceased estate not the person receiving it.
It is 7 years, but it’s amount of tax is tapered - look it up.
An individual has about 300k, if they were married and the partner died and passed everything to the surviving parter then you can combine their iht amount too.
If a property is passed to siblings at death, there’s about another 150k allowance.
So potentially around 700k before any iht is due depending on circumstances
It’s £325k, plus a potential further £175k if you own a home and the estate is less than £2m. It is 7 years, but it’s amount of tax is tapered - look it up.
An individual has about 300k, if they were married and the partner died and passed everything to the surviving parter then you can combine their iht amount too.
If a property is passed to siblings at death, there’s about another 150k allowance.
So potentially around 700k before any iht is due depending on circumstances
Tapering only applies to gifts made in excess of the nil rate £325k. Gifts below that use the nil rate allowance for the 7 years.
Grandad Gaz said:
Don’t underestimate how much effort is involved in looking after parents in their last years!
Like you, we thought it would be a good idea to turn our large attached garage into an annex for my parents a few years back.
Thank god we didn’t. There is no way we would be able to care for my mother the way she has been over the last 18 months or so. She has acute dementia. She cannot feed herself, has even lost the ability to chew food, so liquids only.
It takes people with years of experience to look after someone in her condition.
Also she would be horrified if she thought she was being a burden to anyone.
Good luck if you go ahead with it.
I’d be lying if I didn’t admit to worrying about it a bit but it seems to be the best solution for us, at least for the near future. Like you, we thought it would be a good idea to turn our large attached garage into an annex for my parents a few years back.
Thank god we didn’t. There is no way we would be able to care for my mother the way she has been over the last 18 months or so. She has acute dementia. She cannot feed herself, has even lost the ability to chew food, so liquids only.
It takes people with years of experience to look after someone in her condition.
Also she would be horrified if she thought she was being a burden to anyone.
Good luck if you go ahead with it.
As I said earlier, she’ll still have about £300K in reserve if the worse were to happen but I don’t know how far that would go these days for residential care. A couple of years perhaps?
It’s hard to predict things like this really though, isn’t it?
Thankfully there’s no history of dementia in the family but I realise that doesn’t count for much.
ellroy said:
eliot said:
inheritance tax comes from the deceased estate not the person receiving it.
It is 7 years, but it’s amount of tax is tapered - look it up.
An individual has about 300k, if they were married and the partner died and passed everything to the surviving parter then you can combine their iht amount too.
If a property is passed to siblings at death, there’s about another 150k allowance.
So potentially around 700k before any iht is due depending on circumstances
It’s £325k, plus a potential further £175k if you own a home and the estate is less than £2m. It is 7 years, but it’s amount of tax is tapered - look it up.
An individual has about 300k, if they were married and the partner died and passed everything to the surviving parter then you can combine their iht amount too.
If a property is passed to siblings at death, there’s about another 150k allowance.
So potentially around 700k before any iht is due depending on circumstances
Tapering only applies to gifts made in excess of the nil rate £325k. Gifts below that use the nil rate allowance for the 7 years.
eliot said:
inheritance tax comes from the deceased estate not the person receiving it.
It is 7 years, but it’s amount of tax is tapered - look it up.
An individual has about 300k, if they were married and the partner died and passed everything to the surviving parter then you can combine their iht amount too.
If a property is passed to siblings at death, there’s about another 150k allowance.
So potentially around 700k before any iht is due depending on circumstances
I’m always curious why people post on topics where they clearly don’t have the appropriate knowledge.It is 7 years, but it’s amount of tax is tapered - look it up.
An individual has about 300k, if they were married and the partner died and passed everything to the surviving parter then you can combine their iht amount too.
If a property is passed to siblings at death, there’s about another 150k allowance.
So potentially around 700k before any iht is due depending on circumstances
Odd.
/I’m off to hand out tips on downforce in the motorsport forum.
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