Can ex mil give ds this amount of money?

[Liesmorelies]

My ds will be going to university in September. Apparently ex's dm has said she will be giving him some money to prevent him getting into debt. At the moment we have no idea how much she means. She had a professional job and has lived a fairly frugal life and I know is very comfortable but I have no idea, obviously, how much she could give.

She is in her late 80s and owns her own home. If she did have the money and wanted to pay his fees and living costs, would this be legally possible? I have another ds 2 years younger also very likely to go university so presumably she would want to treat them equally according to what she could afford. Ds1 has said he will split it 50/50 with his brother if this isn't mentioned.

But can she give away such large sums at her age?

Too funny that is my parents say they will help and they are minted and might give a 100 quid🤣 to something that is thousands.

You can carry the annual 3k exemption forward for 1 tax year, so in effect, in the first year she can gift £6k, then £3k per year thereafter.

I don’t think it’s illegal for old people to spend money if that’s what you mean. Or are you talking about tax on gifts should she pop her clogs soon?

The estate would be taxed rather than the grandson.

Also if she is able to show the payment came from income then it isn't liable to IHT anyway. If she had substantial investment and pension income this may be the case.

As usual so much incorrect information on this thread

if it’s over £3k a year she needs professional advice first

Not really. I don't know about deprivation of assets, but I've just been executor for a complicated estate and there's plenty of accurate information on this thread.

If you are only talking about gifts of money, the GM can gift any amount she likes. If IHT will be due, you don't need to declare small gifts below £250 pa per person, or the first £3k pa (unless these went to the same person). Above that, the executors do need to declare all gifts made in the past 7 years so she should keep a record of these. IHT on the first £325k of gifts is paid by the estate. It's only above that amount that the recipient becomes responsible for the tax.

If the gifts are regular gifts out of excess income, eg to help someone with living costs, there is no limit to the amount that can be gifted free of IHT. So if GM has an annual income of £50k but only spends £20k pa on her own living costs, she can make regular payments of up to £30k pa completely free of IHT. You do have to fill in a detailed income/expenditure section on the IHT form to prove it was truly excess income so again, she should keep good records so it's easier for her executors. HMRC guidance on all of this is on the govt website so it's easy to take a look if you're worried.

But assuming you aren't an executor, you or your DS don't have to worry about tax implications at all as it's the estate that will pay it.

Regular gifts from income that don't diminish the person's standard of living are disregarded for inheritance tax.

(Regular is not defined, it could be every ten years)

Two separate considerations - deprivation of assets which is hard to comment on unless you know her full financial position. As said it depends on whether she needs government support - and not everyone does. 1 in 7 pay out more than 100,000 - so if she has assets of more than that amount she can argue she had a legitimate belief she wouldnt need more than that.

Capital gains tax is simpler - no liability up to 3k a year or if she didnt make use of the allowance the previous year (for anyone) then she can give 6k. If it's a regular payment from excess income any amount can be free of capital gains tax, just keep good records.

She could give him regular payments each term.

If she gives him a large lump sum CGT might be relevant but the rate starts to drop after 3 years and is zero after 7 years. If she wants to give money to the younger one best to start the timer going on that by gifting the money now.

We buy things for our GC, for example a laptop or pay for school trips. Perhaps your MIL pay for practical things that he will need for University (or pay for a food delivery if he’s self catering) and give them as gifts and save him spending money.

I have given almost £200,000 away to my adult children. Langley from the sale of mother’s house and other help through the years. There is nothing anybody can do about it as it is my money. Nobody in any sort of ‘authority’ knows about it.

Like your mum, I will never required any state support so there will be no deprivation of assets.

No it's not strange, as there could be inheritance tax implications if she dies within seven years. OP needs to look into this and ger DS to put some aside.

I'm getting an image of Grandma sellotaping a pound coin into a congratulations card.
But in seriousness, she can make gifts and any tax liability lies with the donor not the recipient.

Only 2.5% of the over 65 population moves into a care home https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/ageing/articles/olderpeoplelivingincarehomesin2021andchangessince2011/2023-10-09#:~:text=The%20proportion%20of%20the%20usual,aged%2085%20years%20and%20over.
The need to be careful about DOA is always over stated on MN, as are concerns about IHT - a tax which is levied on very few estates.

Op doesn’t need to do anything, nor does her son, as any IHT would be paid from the Grandma’s estate, so nothing to do with Op and her son. He doesn’t need to put anything aside!

So many posters have no clue what they are talking about!

@anyolddinosaur

Why are you talking about capital gains tax regarding the Grandmas money?

That's not a particularly useful statistic - most people who move into a care home will do so long after they turn 65. The relevant number is how many people need a care home at some point. (From memory, that's around 1 in 3).

@Liesmorelies apologies if it's been mentioned but a fairly recent thread had someone complaining that after making huge announcements about supporting grandchild through uni, they gave 25 a month 😂
Now I'd be hugely greatful for 25 a month but this had come with great fanfare and largesse from so called wealthy pils

Are you sure? Do you work in this area? I think you're wrong.

I don’t work in the area, but have done probate for a number of estates, IHT is always paid from the money left by the deceased, anyone with even a basic knowledge of probate and estates will tell you that.

Maybe read the government website, their first sentence states “Inheritance Tax is a tax on the estate (the property, money and possessions) of someone who’s died.” The clue here is the word “estate”.

www.gov.uk/inheritance-tax

@Vickyvogue25 is correct. It's the estate that pays the IHT, up to a total of £325k. It's only when more than £325k is gifted within 7 years that that the tax on gifts above that total become the responsibility of the recipient. Gifts are the first thing that comes out of the £325k allowance every estate has before it becomes liable for IHT.

Thanks pencil.

Though @pencilcaseandcabbage if the cumulative amount to several people is in excess of £325k, is it divided pro-rata, or who pays?

My mum had a great big conversation with me about her will and how much she would be leaving to her only grandchild. It was a relatively small sum. Immaterial to the rest of her estate. She asked me whether it would be appropriate to set up a trust fund. I, Said no, thank you. It would be a lovely sum for the child. For a deposit on a new car, or part rental for a flat. But trust fund not necessary. Believe me what an elderly person believes is an enormous sum of money is barely sufficient for a young person starting out today. So if you can clarify the sum. Without seeing grabby , that would be a good thing to do.

Assuming her estate is over the threshold (which sounds likely) then significant gifts would be subject to inheritance tax if she dies within seven years of giving them to your DS. Not that that should prevent her doing it, but OP is right to want to understand the implications.