IHT on gifts

[Siezethefish]

Morning all (if in UK)

I am hoping someone with experience of this can give a legal view before I ask a solicitor.

DF wants to gift me and my DB some money now rather than us receiving this when he dies. The amount would be more than the £3k limit that can be gifted from a parent in a year.

DF thinks this gift will be subject to IHT, I think not as his overall estate including the gifted amount will be less than the IHT threshold regardless of how much longer he lives. Who is right and why? DF is refusing to pay a solicitor for legal advice.

And secondly, when my DM died, she left her estate to my DF, when he dies, DB and I are the beneficiaries. Since DM's IHT allowance was untouched, does this double up DFs IHT allowance provided we fill in the necessary forms?

Thanks in advance

You are right. If the estate is under the IHT limit then no IHT can be due even if it is all given away before death.

(not a lawyer but looked at this stuff a fair bit)

a bigger consideration is whether the gift would be viewed as deprivation of assets if he is ever in a position where public funds are needed to pay for a care home.

And on your second question, yes, he should in general have a double IHT-tax-free band.

I am assuming here you are in England. Scotland may be different.

Thanks @SheilaFentiman - it is possible he will have to go into care at some point but this would be self funded out of his pension / estate.

I guess if he lived to say his 90s this might be an issue as he might run out of funding money and then be reliant on the state but this would be more than 7 years away. Is it right in this circumstance that this wouldn't then be considered deprivation of assets?

not in Scotland

I think, were there a prospect of DF's estate being liable to IHT at death these would be potentially exempt transfers.

If DF, giving the gift, lives for 7 more years then no IHT.

If he died within 7 years PETs are added back and tax is payable but not necessarily at the full rate.

Keep a record of any transfers that might give rise to complications on death.

We had a hell of game when my DM died. She'd made gifts but intermingled the amounts with money owed for stuff we'd bought/organised for her becuase she was physically frail and could not do herself. Some of the gifts were PETs others were outwith IHT as they were for birthdays or whatever.

Deprivation of assets is mostly about intent.

Question for DWP/LA is whether the assets disposed of so as to access benefit or increase amount payable.

Your Dad inherits your Mum’s IHT nil rate allowance. In addition if there is a house there is an added allowance to cover a primary home being left to direct descendants (children / grandchildren). This would take your Df’s allowance to £1m in total.

How old is your Dad at present? Does he have any known / existing illnesses or conditions that make it likely he would need care in future? (E.g has a dementia diagnosis / had a stroke / any progressive condition? ). If he is fit and able and fending well for himself it would be hard to bring a Deprivation of Assets case. Also if he was giving you the £££ for a specific purpose, e.g house deposit, extension, new car. In any case this would only become an issue if his other savings / assets / pension could no longer cover his care costs.