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?

Just seen this has already been covered. And yes, it's not that DS would have to pay it, but presumably OP and wider family would be recipient of the estate and so should be aware.

On the IHT form (IHT403 supplement) you list all gifts, including who they were made to, and separately you give contact details of every recipient in the past 7 years. The executor also has to say whether they have permission to deal with HMRC on the recipient's behalf. The IHT on all gifts up to the £325k threshold is included in the initial amount that must be paid by the estate on submitting the IHT forms. For all gifts beyond this amount, HMRC will then contact the recipient directly (or the executor if permission has been given) to request the tax due on each individual gift/s made to that recipient. This could apply even to quite small gifts if the person who died had already used up their £325k allowance on gifts to others. E.g Rod gifts £400k to Jane and then £1k to Freddie. The initial IHT that must be paid on submission of the IHT forms includes only the tax due on the first £325k of the gift to Jane. Then HMRC will contact Jane directly to ask for the additional tax due on the remaining £75k of her gift, and contacts Freddie to ask for the IHT due on his £1k gift. There is surprisingly little time to pay the additional tax on these gifts (weeks rather than months). The executor can still apply for probate before the tax due on these additional gifts has been paid.

It's also surprising what counts as a gift. E.g. assets being transferred into a trust is a gift (to the beneficiary of the trust). Even life assurance premiums count as a gift if the policy pays out to someone who is not their spouse/civil partner. And because HMRC considers gifts in date order, oldest first, taper relief only ever applies to gifts made after the £325k allowance has already been used up. It's entirely possible for the entire £325k allowance to be used up by gifts to people who aren't even beneficiaries of the estate (sorry I digress, but that information might be useful to someone).

Sorry I made that sound really complicated!

TL:DR When gifts totalling more than £325k are made, the individual recipient of gifts beyond that £325k total is directly responsible for the tax due on the amount they received. There is no tax due on gifts up to £325k because these are the first things to use up the £325k tax free allowance.

This does mean that if Rod gives £325k to Jane and the next day gives £325k to Freddie, Jane would pay no IHT at all but Freddie could be liable to pay 40%, depending on how long ago it was given. This assumes no other gifts were made.

@DidSomeoneTrump I think this is what you were asking.

Yes thanks, it was. So it is really something the student grandson should be aware could be a liability if the grandmother has given a lot away.

Gone are the days where a grandma can't gift to a child without it becoming a scene. Child shouldn't feel he has to share what he gets unless he's been told to or a discussion has been had in front of him which is still wrong. His grandma wants to give him a gift let him enjoy whatever it may be. Wether she chooses to do so for the other child is another relationship but if she has always treat then the same then I don't get why your bothered tbh

What a thoughtful and caring grandma she is.

You really need to know how much she is suggesting first.

She's 80 but unless she has lost her marbles or eg has a diagnosis of early onset dementia she can do what she likes with her money.

Also if it's from her annual unused income it may be shrewd estate planning on her part. Unlikely you will know unless she chooses to share this you.

I can assure you, there will be a record unless you gave them cash. If there is any tax owing it will be taken out your estate when you die.

Maybe try to be creative. Food delivery is a good idea as a pp suggested. Or load cash onto one of those pre paid Visa cards.
The thing to remember is they look for sudden changes when going over financial records. So if she suddenly starts taking $500 cash a week it could be questioned.

The money was all taxed before I got it. As I said earlier, I won’t be claiming any state benefits. I have enough saved and my house money for about 10 years or more care home fees. I am already 80 and in Good health. I won’t come anywhere near inheritance tax. I have no objection to paying taxes due. I can’t stand people who try to avoid paying for their care home. I have seen all sorts of devious behaviour from others.

My plan is to pay for as much help at home as possible while I can, then move into a nice care home if necessary .

My mother tried to hold the fact that I would inherit her house over me my whole life. It would have choked me to spend a penny of it, so I divided up among all my children. They are aware that any money I have left is for my old age.

If she wants to avoid him getting into debt than it will be more than 3k she is planning on giving. My DS’s dad pays 20k per year for his uni fees and accomodation. So yes, it might have an impact on IHT if her estates takes her into that category

It definitely needs careful thought by the sounds of it. The problem is it's not something I can get involved in as it's ex''s family so not my business. Except it is If it affects my children. I don't want ds suddenly being hit with a tax bill or having to pay money back unexpectedly, though I doubt it would go over the c.300k figure quoted above. Having said that, I'm pretty sure she gives money to both her dc (one is useless ex who doesn't have a proper job and the other is disabled and can't work anymore). Also, mil has a partner whose life is a bit of a car crash and ex always used to moan that she gave him money too, though I don't know if she does- it may just be that she pays for stuff they do together. So sounds like ds may end up in a position to have to pay money back because of these other gifts? She's 89 so sadly likely to be in the last 7 years of life, especially in the last years of ds2's degree.

Which brings me on to ds2. I don't want to be in a position where ds1 has no student loan debt and ds2 ends up with the full amount owing. No matter what I do I wouldn't be able to prevent that. Ex won't contribute anything, any input from his side will come from his dm.

I wish I could have a conversation with direct with his mother as it's the two of us who'll be providing everything, assuming she is thinking of giving significant amounts, but sadly I'll have to find everything out third hand via ex and then dc, who thankfully are sensible and reasonable.

It's not CGT! It's inheritance tax

Only thought is it could attract inheritance tax if she dies within 7 years if she 'gifts it' and it's more than £3k in tax year. Not sure how it works if she pays fees directly?

@pencilcaseandcabbage so a child with no access yet to the money gifted may have to pay a tax bill?

What happens if the executor simply doesn't say x was given 5 grand two years ago? How would they ever know?
Even on a bank statement 5 grand to blah could be payment or re payment

Certainly your exMiL needs advice on how best to go about this. However Rachel Reeves is considering removing the 7 year rule, so it might be worth her getting her skates on.

Well, it's up to the executors to be honest. If they aren't, they may or may not get found out. I read examples where HMRC investigated that sort of thing several years later. Undoubtedly many people would get away with it but it wasn't something I could personally risk. Not least because if HMRC think you were deliberately lying to pay less IHT, the fine could be 100% of the tax owed. Plus you still have to pay the unpaid tax. Depending on the size of the gift, it could be quite a risk.

As for children having a tax bill before they had access to the gifted money, children under 16 can't have accounts solely in their name so I assume the relevant adult would deal with it on their behalf. But this wasn't something I had to deal with. My (very recent) IHT experience is as executor for a very complex estate that has included everything I've mentioned on this thread (and much more). I needed a meeting with a specialist accountant to ensure I'd got everything correct.

Oops - inheritance tax not CGT. Still the point is she can give some sums away without it being a consideration but if she's gifting possibly considerable sums left right and centre the student child could find themself with a 40% tax bill. Inheritance tax only starts to taper after 3 years and it's not a rapid descent.

Personally I've given my kid a substantial amount over the years and aim to survive 7 years so they dont have to pay 40% of it to the tax man. I think we're up to year 4 or 5 for most of it and past the 7 years for some. Rachel Reeves say she has no plan to change the 7 year rule but faced with higher borrowing costs who knows. If she had any sense she'd increase the gifting allowances and encourage older people to pass more money out now. That money is then spent, not saved, and she gets her tax take quicker. Maybe she gets more tax as if it's left to kids later they may not pay tax on it.

Citation needed.

He's extremely unlikely to have to pay back any tax.

That would only happen if the estate was in the IHT band anyway (they aren't all) AND there wasn't enough left in the estate the past the tax (unlikely if she owns a property).

Why can’t you speak to her about it, don’t you talk to her any more?

This is so wrong. The student child will never get a 40% tax bill for it.

@LivLuna Read it and weep. https://www.gov.uk/inheritance-tax/gifts

If she dies within 7 years of giving money hmrc will apply some inheritance tax on money given. If she needs care and runs out of money they will consider whether she has deliberately deprived herself of assets in order to avoid paying for care.

It is not regarded as a gift if it is a regular payment like this.

@anyolddinosaur
I understand that if there is not enough money in the estate to pay IHT then a gift recipient may have to pay some tax but it will not be 40% as there are allowances available so the 40% rate is only applied to the excess. In addition the OP states that she owns her own home implying there are other assets available and these would be used to pay the tax from the estate before HMRC go after any recipient of a gift.