Gift from grandparent
Discussion
My mum has just turned 90 and has decided that she wants to give her four grandchildren some money to help them with driving lessons/university stuff etc now, rather than them inherit it when it might no be as needed.
Looking up online, she can give away £3000 per financial year without it affecting inheritance, plus she can back-date for an unused previous year.
As she hasn't made any gifts last year, as far as i understand it she can give £3k for the 2021-22 FY, and another £3k for 2022-23 FY now, and then a further £3k after 6 April during the 2023-2024 FY.
Do I need to make any record of these transactions? She only gets a state pension, so doesn't do a self assessment or anything. I know that gifts given within seven years of death (and although she is in fine fettle, the odds on surviving to 97 are obviously fairly short) are included in inheritance tax calcs and i don't want anything to get complicated
Looking up online, she can give away £3000 per financial year without it affecting inheritance, plus she can back-date for an unused previous year.
As she hasn't made any gifts last year, as far as i understand it she can give £3k for the 2021-22 FY, and another £3k for 2022-23 FY now, and then a further £3k after 6 April during the 2023-2024 FY.
Do I need to make any record of these transactions? She only gets a state pension, so doesn't do a self assessment or anything. I know that gifts given within seven years of death (and although she is in fine fettle, the odds on surviving to 97 are obviously fairly short) are included in inheritance tax calcs and i don't want anything to get complicated
Taita said:
IIRC Gifts from regular income are exempt IHT.
eg she could live off savings, send £5k a year from pension income without worrying about IHT etc.
Double check my understanding though.
Only if she lives off savings income - not capital...eg she could live off savings, send £5k a year from pension income without worrying about IHT etc.
Double check my understanding though.
You have several avenues for IHT free giving:
- give the money and live 7 years or more (sliding scale of IHT if you die within the 7 years)
- give up to your allowance each year - allowance varies as can include e.g. gifts for marriage above the norm)
- give out of income - but only surplus income, so if your income is £100k p/a and you live off £30k you can give away the other £70k, but you can't live off £30k capital from elsewhere and then give away £100k
akirk said:
Taita said:
IIRC Gifts from regular income are exempt IHT.
eg she could live off savings, send £5k a year from pension income without worrying about IHT etc.
Double check my understanding though.
Only if she lives off savings income - not capital...eg she could live off savings, send £5k a year from pension income without worrying about IHT etc.
Double check my understanding though.
You have several avenues for IHT free giving:
- give the money and live 7 years or more (sliding scale of IHT if you die within the 7 years)
- give up to your allowance each year - allowance varies as can include e.g. gifts for marriage above the norm)
- give out of income - but only surplus income, so if your income is £100k p/a and you live off £30k you can give away the other £70k, but you can't live off £30k capital from elsewhere and then give away £100k
SunsetZed said:
That's very interesting, how is that income versus capital defined if you've got a pension in drawdown? Is it as simple as all DC pension savings count as income (I fear not!)
Key thing is the word "regular". So long as your SIPP drawdown income is regular and your total income is regularly sufficient to cover the regular gifts you should be fine.Essential to keep good records to back up any and all gifting.
Regarding the "7 year rule" note it's the tax which tapers and not the gift. So if if you use your whole IHT allowance it's gone for 7 years, including death. After the 7 years a whole new one pops up again.
Panamax said:
Regarding the "7 year rule" note it's the tax which tapers and not the gift. So if if you use your whole IHT allowance it's gone for 7 years, including death. After the 7 years a whole new one pops up again.
Sorry being lazy.
Please list the tapering tax percentage rates during the 7 years after gift.
I am using the gifts from regular income exemption, but as stated, that can only be from not required regular income.
Capital does not count.
OP states mother only has state pension income. I find it difficult to believe anyone can even live on that alone. Having any remaining
income to gift, must be impossible.
Panamax said:
SunsetZed said:
That's very interesting, how is that income versus capital defined if you've got a pension in drawdown? Is it as simple as all DC pension savings count as income (I fear not!)
Key thing is the word "regular". So long as your SIPP drawdown income is regular and your total income is regularly sufficient to cover the regular gifts you should be fine.Essential to keep good records to back up any and all gifting.
Regarding the "7 year rule" note it's the tax which tapers and not the gift. So if if you use your whole IHT allowance it's gone for 7 years, including death. After the 7 years a whole new one pops up again.
SunsetZed said:
That strikes me as an absolute minefield trying to define regular income during drawdown. For example, taking more money from savings and less from drawdown due to market conditions (and vice versa), buying a new car every X years, having a bigger holiday etc. Say you gift in a year when you've taken more income would you have to prove that you took more income for the car and that the gift didn't come from the extra income?!
The gift has to be from surplus income eg. after normal living expenses.There's lots of guidance available on this eg:
https://www.gabyhardwicke.co.uk/briefing-notes/inh...
LeoSayer said:
SunsetZed said:
That strikes me as an absolute minefield trying to define regular income during drawdown. For example, taking more money from savings and less from drawdown due to market conditions (and vice versa), buying a new car every X years, having a bigger holiday etc. Say you gift in a year when you've taken more income would you have to prove that you took more income for the car and that the gift didn't come from the extra income?!
The gift has to be from surplus income eg. after normal living expenses.There's lots of guidance available on this eg:
https://www.gabyhardwicke.co.uk/briefing-notes/inh...
Apologies OP for derailing your thread!
steveo3002 said:
would it help if grandparent paid direct for the driving lessons rather than a bank transfer to the grandchild
It might be easier, but there are four grandkids – two are mine, two are my sister's – and they won't necessarily all want to learn to drive/go to university. She just wants to give them a few thousand each that can be used for something useful while she is still alive to see them. She doesn't think that she will need it, and would rather see it used to benefit the family.Unless there are amazing rises in property values in the near future, I don't think she (or technically, me) will have to pay inheritance tax anyway.
Jon39 said:
OP states mother only has state pension income. I find it difficult to believe anyone can even live on that alone. Having any remaining
income to gift, must be impossible.
Gas/elec is £160 per month (£40 per week, more or less)
Broadband/phone is £15 per month (£4 per week)
Food is about £50 per week
other groceries £10 per week
Other than that, she doesn't spend much. Clothes are generally gifts from us, bus is free, TV licence is free, doesn't do holidays now. Her hobbies (walking club, french classes and a book club) are free apart from a packet of biscuits every couple of weeks.
What do you spend your money on at 90?
Jon39 said:
OP states mother only has state pension income. I find it difficult to believe anyone can even live on that alone. Having any remaining
income to gift, must be impossible.
I think that's the reality in most older households; people are already supplementing their spending from savings of one sort or another so have no surplus income to give away to anyone.income to gift, must be impossible.
From a SIPP it's pretty clear when income is drawn and if it's drawn regularly that seems to tick the box.
From an ISA it seems less clear, particularly if the investor has been on a "growth and gains" strategy rather than a "natural income" strategy. But at the end of the day I'd have thought someone taking regular withdrawals from an ISA to supplement their income could probably try to claim that regular gifts were being made out of that regular income, much like a SIPP. See the Hardwicke link above.
All of this will always be dependent upon the meaning of "regular" in particular circumstances. Regularly for 10 years seems pretty clear. Helping grand-child at uni for 3 years might be more marginal.
boyse7en said:
It might be easier, but there are four grandkids – two are mine, two are my sister's – and they won't necessarily all want to learn to drive/go to university. She just wants to give them a few thousand each that can be used for something useful while she is still alive to see them. She doesn't think that she will need it, and would rather see it used to benefit the family.
Unless there are amazing rises in property values in the near future, I don't think she (or technically, me) will have to pay inheritance tax anyway.
No point overthinking it then.Unless there are amazing rises in property values in the near future, I don't think she (or technically, me) will have to pay inheritance tax anyway.
She should just give them the money.
boyse7en said:
She get £178 per week
Has she checked if she's entitled to anything else? You didn't mention many other likely costs, things like Council Tax which is pretty significant, insurance etc.We looked after wife's Godfather during his 90's and he was getting about 2x the state pension in various benefits. I think other stuff kicks in for over 80, and his local authority had all sorts of schemes for over 80's - thinks like home monitoring etc. He also was spending little and I seem to recall there was some savings limit that he couldn't go over, alhough he did later go onto a life-time assessment and then savings breaking through don't matter.
There was regular stuff to buy - new TV, new washing machine, rise & fall chair etc. We were on the brink of having the whole heating system replaced when he croaked.
Agree with the above poster though, if she's not near the IHT level then don't worry about gifts.
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