Passing on late dad's money to children - tax?

[Mumwithbaggage]

Hello,
After over a year, I have a grant of letters of administration for my late father. No inheritance tax - house was in our names, but in his will dad named me as sole beneficiary and wanted me to distribute some of his cash to my adult children as I saw fit. It's only about £8,000 each - will put the youngest's somewhere till she has finished university.

I've had a search - do I need to do anything special to make sure they don't need to pay tax on it? Write a letter? Make sure they have a copy of the will?

Would be very grateful if anyone can point me in the right direction. Thank you.

So you inherited your father's estate in full. You now want to give some of that to your adult children.

The risk maybe that if you were to die in the next few years those payments would be seen as part of your estate so that, added to your estate at death, they might affect IHT.

AIUI their are amounts you can give away each year. You can also make certain gifts.

If your own estate is anywhere near the IHT threshold it's probably worth taking professional advice.

To avoid that problem, you might want to consider varying your father's will so that instead of leaving everything to you he leaves £8000 (or however much you think) to each of the children and the rest to you.

More details here: www.gov.uk/alter-a-will-after-a-death

I think this is called a deed of variation and is usually quite simple.

That's really helpful, thank you. Fifthtimelucky that's what I'll do! Thank you for the link.

Below inheritance tax threshold

@Mumwithbaggage Some of the advice above is unnecessary. If your dads estate has not paid IHT, and is below the threshold, you can do whatever you like with the money! We have given substantial amounts to DDs. As long as we live for 7 years after the gift, that’s just fine. It’s theirs. So keep the will as it is. Realise the assets you need to and give the amounts you want to DC. It’s your money. No tax implication that I know of. Although any interest might be liable to income tax.

That is true. But, as you've said, the OP would have to live for 7 years after the gift.

The point of the deed of variation is that it protects against the risk that the OP dies within the 7 years. The money would be redirected to the grandchildren immediately so would never form part of the OP's estate.

Obviously, I very much hope to live for the next seven years but the deed of variation covers just in case so I've written a letter with a copy of the will (which says to distribute as I see fit). In trying to make it easy for me, my lovely dad made it far more complicated than he needed to ❤

AIUI a deed of variation allows you to re-write a will (or intestacy). It's done before the grant and, necessarily, any distribution. Some 40 years ago my Mum did it after her brother died intestate so that his wife got the estate.

Once the OP, as sole beneficiary, has a grant of letters it's too late.

What they can do, apart from doing their best to cling on for 7 years, is to ensure they use things like annual allowances, gifts and perhaps excess income so as to keep gifts out of IHT reckoning.