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cash gift from in laws - tax implications?

(8 Posts)
Scarletisme Sat 03-Nov-12 20:15:58

Hi - I'm confused and would appreciate advice. I will try and give as much info as I can.

My FIL (84) has terminal lung cancer and is in hospital, prognosis is a few weeks at best. MIL is 86, in poor health herself, although mobile and mentally capable. My H is an only child, we have 2 DCs at primary school. We live around 40 minutes away.

They own their home outright (worth c£250-275k) and have cash assets/deposits of c£80-100k. MIL is still at home at present, we have to consider her needs when she is alone in due course, its a 60's 3 bed semi but arguably she may not cope well alone - she has said as much, but doesnt want to go in a home, which we understand. We live in an old cottage where steep stairs and lack of facilities to be honest would make it impossible for her to come here, no spare bedroom either (and with a DS and DD I cant bunk them in together).

We have been struggling financially (H has own business, and it has been tough). They want to give us c£30k from one of their deposits now, which to be honest would be a godsend. They 'dont need it' and it was always intended for us anyway, no other family. Everything passes to surviving IL (obviously likely to be MIL) then to my H on the latters death, we have seen the wills.

I am confused over whether we have any tax implications here, given I really cannot see MIL lasting 7 years, which I know is the IHT limit? Also - to be honest - how would the tax man know we have recieved this money?

Thanks in advance

BlackandGold Sat 03-Nov-12 21:05:27

There is an increased threshold for married couples: see link below

www.hmrc.gov.uk/inheritancetax/intro/basics.htm

They can give you 6K now with no strings attached by the sound of it

digerd Sat 03-Nov-12 21:10:27

As your husband is self employed, I think it would be his obligation to mention this "gift" in his next years tax return as part of his income.

ChablisLover Sun 04-Nov-12 07:36:07

It wouldn't be classified as income on dh tax return.

It's a gift not income from his employment or business.

There are inheritance tax consequences for in laws though as mentioned.

ChablisLover Sun 04-Nov-12 07:43:33

Sorry posted too soon

Tax man knows everything unfortunately

They get details from all financial institutions

The transfer to spouse on death will most likely iht free but need to consider gifts. A person can gift up to £3k pa with no implications. But if not used prior year allowance can carry it forward so can gift £6k. The 7 years are on a sliding scale so if mil survives 5 years only a percentage is chargeable.

The gift though will only come into play on death. It will reduce the nil rate band for the total estate but given that 2 nil rate bands are available on 2nd death you have approx £650k to deal with to cover the total assets

Would recommend you contact accountant for proper estate advice as you may need a power of attorney for the future.

Hope this helps - is all I can remember at this hour with a 5 year old ds crawling over me!

Oodthunkit Sun 04-Nov-12 07:53:24

Also going into a home may be an option and they could be seen as depriving themselves of assets. Also on those values they wouldn't be entitled to financial help anyway

MrAnchovy Sun 04-Nov-12 13:59:23

There are no adverse tax implications. In particular a genuine gift is NEVER counted as income.

The 7 year rule simply means that the estate may have to pay inheritance tax on some or all of the amount of the gift - but if the gift wasn't given then it would form part of the estate and so IHT would have to be paid on all of it anyway!

clarasebal Wed 18-Sep-13 19:30:01

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