To accept this gift from my parents?

[LadyJos]

My parents have very kindly offered to gift us 40k towards buying our first home. We are in our forties with two children and have of course worked hard for about 15 years to save a deposit.

After looking carefully at our finances, it seems we might just be able to buy a house without this 40k, although it would mean other financial sacrifices to make that happen and would make the our mortgage very expensive (although not unaffordable).

I feel I should come clean to my parents and tell them we may be able to make it work without this gift after all. If it were just my dad, I think he would offer the gift (or some of it) anyway. However, if my mum has this information she’ll want to withdraw it all together as she is very tight about money.

They are very well off but not to a ridiculous extent. My husband and I both work hard in good professional jobs. I’m really morally torn over whether to take the gift and make my family’s life financially easier or to explain that it might not be necessary, and lose the gift. AIBU?

It depends on how they’re planning to get it/their lifestyle.

If they’re struggling in any way and are planning to take equity from the home, then I’d consider saying no or just half or something.

If it’s just there in the bank and they have no need for it, then I wouldn’t think twice about it.

Surely if they have this sort of money spare, you are going to receive a decent inheritance anyway and so I would see it as part of your inheritance but one you can use sooner rather than later.

No don't do this ffs

Read the full thread. Wasn’t my suggestion originally.

Because I definitely said don’t have the discussion with your parents.

I did and I know. But you’re the one repeatedly doubling down on it! Which I just find a bit mad and amusing.

Have you/they considered the tax implications? You can't just gift someone 40k without paying a ton of tax on everything above £3k. May not be worth it if you don't actually need it.

This.

And You need to understand the situation around payment for care home fees- time for a serious albeit uncomfortable discussion.

if your parents are already elderly, and they give away this sum, a council could still pursue costs under deprivation of assets and come after you .

They have to be able to show that what they give you, is not a significant proportion of their savings (so if it is to avoid IHT, clearly it’s harder to say deprivation of assets as there’s still £1million ) . The 2 issues go hand in hand

unfortunatley too many people don’t consider care home costs. Don’t want to. But there is a reasonably high probability that one of them may need to. Costs are £1500 to £2000 per WEEK . Without money to afford it they’ll get a very basic offering. My dad developed dementia, luckily he has money so can afford something nice - but he hates being there, sadly and desperately. God know what he’d be like in a worse home. It is as well he has a home that can be sold when his saving run out as he could be there for some years.

If they’re fine both for IHT planning and care home costs, then to meet IHT requirements the gift must be “no strings attached” otherwise it’s not seen by HMRC as gift. Make sure they are clear on that, they give it, they have no say on what it’s used for. And can’t object . If they can’t do that then they should not gift.

ifcall thst checks out, then yes accept. Reducing your mortgage is a good use of money whilst interest rates are high. You don’t then need to tell them what you’re using it for anyway as per above.

You can. You just need to survive for seven years after the gift is made. I know. I’ve done it - 18 months to go then I can die!

I’d be horrified if I gifted my DC money for a property and then they ‘wasted’ £10k on a holiday, I’d feel duped.

Agreed!

Please don't do this. It is a really crap idea.

This is incorrect in the UK. It will be a PET (Potentially Exempt Transfer) and comes under inheritance tax legislation. If the donor survives seven years it is tax free, as a PP said. (There is a sliding scale of charges if the donor dies sooner).

100% take it. When they get older it will be harder for them to give you any cash with inheritance tax implications. Keep quiet about the savings, no need to lie just dont say much about it.

Hmm - not true at all.

the £3k tax exempt refers to IHT. You can gift anyone anything. If you die within 7 years of that gift (above £3k and other “allowances, and there are many), then the sum gifted is included in the estate value. If estate value exceeds IHT limits then your estate will pay tax due on it.
but if you give away £40k , and 5 years later you die, and your estate is valued less than £375k (£500k with house) there is still no tax to pay.

if your fit, healthy and in your 40s, giving £40k away , if you had it lying around, will have no tax implications, unless your extremely unlucky and die suddenly. It’s rare as most 40 year old don’t have that cash to gift.

unless you are in different country than England. Please explain why you think this

If the parents wanted to go on holidays, they would do. They don't need their adult daughter to take them as if they were incapable! My parents have gifted me money in the past for house deposits. They would have been very annoyed if I then went and wasted it on a holiday, even if they were included

If this were me gifting to you for a house deposit and you spent 10k on a holiday I'd be extremely annoyed. This is a stupid idea....

That's only inheritance tax, there's also income tax. Still needs declaring to HMRC.

Talk to them about it. They might want to see you benefit from money they'd otherwise leave you in a will. At least this way, they get to see the results.

Lone voice here, but in your situation, I’d be honest with your parents. You could always talk to your dad rather than your mum and dad…

You are incorrect, see my post above. It falls under Inheritance Tax.

It isn’t income for the recipient - how do you figure this?

yes, it can effect state benefits- suddenly you could loose benefits.

but a gift is not income.

If you invest that gift, and then the value of that asset grows, it may be liable to capital gains tax when you then sell it. But if you’ve invested your gift in your main home, that’s exempt from capital gains as well. If you pop some of that investment into ISA that’s also exempt form capital gains.

really don’t understand why you say a gift of £40k is taxable.

I wouldn't do that, this might annoy them if they've given it with only the intention of buying a house (I'd personally be annoyed). I would take it, and then if you do find yourself back with that money in savings put aside for them and offer it back at a later date.

I agree with this

you need to talk. As per my previous post, you need to understand their motivation. You need to understand their situation around care home costs. They (your dad) may feel ok about gifting it now, but if one of them ends up needing care, it could put huge stress on them to be without it, you could feel enormous guilt about depriving them of options they might have had.

talk. Make sure they’ve thought of all that. Only if they and you are comfortable they can “loose” it, accept it

id certainly not have accept3d that sum form my dad. Just as wel, as he needs it now for care home fees. I’m retired and will not be passing on savings to kids. Before my death- I don’t want to end up in a care home at all, but if I have to (don’t expect my kids dc to care for me) I don’t want to go into a shit hole, or even somewhere with a crap room and crap food. Small things will matter if I don’t know where I am fgs.

I’d take it - it might also be part of their estate planning for tax purposes to avoid it going to Rishi!

Accept and either get a smaller mortgage or buy a better house. Think of it is a gift for your family, for your children, for your shared future.