Inheritance tax, annual gifts query.
Discussion
This is hypothetical at present but may become real.
My father is 87 and currently in rude health but at 87 we all realise that we could lose him any time.
During the pandemic I sorted everything out for him and he would routinely give me lump sums in the form of cheques that I paid into my account to fund his Tesco shops, paper bill and other expenses to keep him safe. I have kept a handwritten list of these payments in and out. My worry is that he also gifted myself and his grandkids some money which combined would take us over the £3000 annual limit. He would give me a cheque to pay in and I would pay the money on via bank transfers as I am the only one in the family banking with HSBC and could pay the cheques in via my phone.
So hypothetically, how do I record this because it's a real possibility he could pass away prior to the 7 years and I just want everything correct. I fear it might be a bit late and should have recorded this better prior to now
My father is 87 and currently in rude health but at 87 we all realise that we could lose him any time.
During the pandemic I sorted everything out for him and he would routinely give me lump sums in the form of cheques that I paid into my account to fund his Tesco shops, paper bill and other expenses to keep him safe. I have kept a handwritten list of these payments in and out. My worry is that he also gifted myself and his grandkids some money which combined would take us over the £3000 annual limit. He would give me a cheque to pay in and I would pay the money on via bank transfers as I am the only one in the family banking with HSBC and could pay the cheques in via my phone.
So hypothetically, how do I record this because it's a real possibility he could pass away prior to the 7 years and I just want everything correct. I fear it might be a bit late and should have recorded this better prior to now
solo2 said:
This is hypothetical at present but may become real.
My father is 87 and currently in rude health but at 87 we all realise that we could lose him any time.
During the pandemic I sorted everything out for him and he would routinely give me lump sums in the form of cheques that I paid into my account to fund his Tesco shops, paper bill and other expenses to keep him safe. I have kept a handwritten list of these payments in and out. My worry is that he also gifted myself and his grandkids some money which combined would take us over the £3000 annual limit. He would give me a cheque to pay in and I would pay the money on via bank transfers as I am the only one in the family banking with HSBC and could pay the cheques in via my phone.
So hypothetically, how do I record this because it's a real possibility he could pass away prior to the 7 years and I just want everything correct. I fear it might be a bit late and should have recorded this better prior to now
The money that was covering his expenses wouldn't be counted towards any gifts, you just need to be able to account for it to a reasonable level. My father is 87 and currently in rude health but at 87 we all realise that we could lose him any time.
During the pandemic I sorted everything out for him and he would routinely give me lump sums in the form of cheques that I paid into my account to fund his Tesco shops, paper bill and other expenses to keep him safe. I have kept a handwritten list of these payments in and out. My worry is that he also gifted myself and his grandkids some money which combined would take us over the £3000 annual limit. He would give me a cheque to pay in and I would pay the money on via bank transfers as I am the only one in the family banking with HSBC and could pay the cheques in via my phone.
So hypothetically, how do I record this because it's a real possibility he could pass away prior to the 7 years and I just want everything correct. I fear it might be a bit late and should have recorded this better prior to now
Also, he's allowed to gift as much as he likes out of "surplus income". So imagine he has after tax income of £25K, but only needs 20K a year to live on, he can give away 5K without any IHT liability. It's a good idea to get him to record this in a letter.
I inherited a client about 10 years ago who passed away a year ago - as she was cash rich, set-her up with all the small gift allowances straight away but it became apparent after a couple of years that she wasn't getting anywhere near spending her annual income so we set up a regular quarterly "gift out of income" payment schedule to children and grandkids.
The IHT400 was submitted with almost £500k of such gifts and almost £200k IHT saved as a result.
The IHT400 was submitted with almost £500k of such gifts and almost £200k IHT saved as a result.
solo2 said:
House worth circa £750k but half is mum's so £375K and about £100K in savings, ISA's etc etc which is he's working through rather quickly!
So total estate is £850k.Your dad has a Nil rate band allowance of £325k and residential nil rate band allowance of £175k (providing the house is left to children or grand children). Your mum also has the same allowances. In total, your parents have £1m of inheritance allowances.
Gifts should be recorded but as the estate is less than £1m, there shouldn't be an IHT issue.
House prices continue to rise, so things could change in a few years time.
Edited by BenB91 on Monday 7th March 10:57
Is your mother still alive and living with/still married to your father? If they are together and they have been making these payments to you from a joint account, they immediately have 2x the £3,000 allowance to play with (and in the year that these payments started, they could well have had some unused allowance from the previous year giving potentially £12k in the first year and £6k pa thereafter...
Mogul said:
Is your mother still alive and living with/still married to your father? If they are together and they have been making these payments to you from a joint account, they immediately have 2x the £3,000 allowance to play with (and in the year that these payments started, they could well have had some unused allowance from the previous year giving potentially £12k in the first year and £6k pa thereafter...
she's still alive but is in a care home being funded by her own finances. My dad has separate his half of the house from hers so should he pass away before her she will no longer directly inherit his half of the house which will be eaten up on care home costs. We are annoyed but have come to terms with the fact her half of the house will have to be repaid in fees once she passes although not sure how that will work.Wondering if I would be better off buying her half of the house now from her before it goes up in value anymore. I want the house to remain in the family, it is the home I was born in and my children spent huge amounts of time there. My eldest now married and with her own family wishes to live there once my parents have passed so I want to limit costs as much as possible rising with house values
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