Tax implications mum's will

[Oldrunner]

My elderly mother has said that her will leaves all assets equally to me and my sister. ( includes a house so prob around 350k)But she has said to us that she wants us to gift some money to our children and a cousin from her estate. But this is not written anywhere in her will. And she has not specified any amount.
My sister and I are happy to gift money as she wishes- I'd imagine I will be doing this for my 3 children from my share, she will do for her 2 children from her share and we will each gift an equal amount to cousin.
But I would be grateful if anyone can advise us if there are any tax implications for this.
If 100% of money from the estate needs to come into our bank accounts before gifts to children/ cousin come off then will any subsequent payments to the children/ cousin be treated as being gifts from me and my sister and not from my mother's estate. And what are the tax laws on this?
In scotland.
Thanks

surely she should just edit her will? Ive got to the point with my parents of saying no if it isnt in a will as they refuse to write one.

If she wants money to go to specific people, she must write it in her will!

The problem with specifying an amount in the will, is it will be taken out first and the remnant shared btn the sisters. That’s fine if she says £5k to each cousin and child, and the estate is worth £350k.

If care fees and the funeral mean the estate is worth only £20k, the children and cousins get everything.

She says she doesn't want to change her will.
Not sure why

She could make a codicil

Then she could state a percentage. But op just say no youll follow the will. Put it back on her to sort.

I think you just “vary”
the Will to give them money before you settle the estate. Should be straight forward. You will have the money in a seperate executor bank account to pay it of

"She says she doesn't want to change her will."

As @CoastalCalm said, the way to do this is by a codicil. This allows a person to amend part of their will without having to rewrite the whole thing.

Just as an example, in researching a family tree I recently came across a codicil made a year after the original will that left some of the money that had been given to one son in the will, to a different person entirely. This was all done in the codicil without having to touch the original will.

But if she isn't even willing to do that then, at the end of the day, whatever is actually written in the will is how her estate will be distributed.

You can choose of your own accord to give money that you have received to other people but you are certainly not required to.

And she has not specified any amount

What does she say when you ask what she has in mind? I think specifying an amount is less relevant for your children as I suppose you can more easily just decide that, but she must have a ballpark of what she wants the cousin to get?

In England, if all beneficiaries agree, you can vary the terms of the Will. Is this an option under Scottish law?

"But I would be grateful if anyone can advise us if there are any tax implications for this.

If 100% of money from the estate needs to come into our bank accounts before gifts to children/ cousin come off then will any subsequent payments to the children/ cousin be treated as being gifts from me and my sister and not from my mother's estate."

To answer this specific question, it doesn't matter which bank accounts it goes into it just depends what the will says.

If the will (and any codicil) leaves everything to you and your sister then any gifts you make to your children are gifts from you to your children and not part of your mum's estate.

If you do pass on any money to your children then there will only be tax implications for the children if you die within seven years of the gift and the total amount that you give your children is more than £325k.

If you die within seven years and the gifts are less than £325k then the gift/s are counted as still belonging to you for inheritance tax purposes.
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"In scotland."

This only really has an effect if your mum has a large bank account or other investments and leaves the money to people other than the children. From what you have said of your situation I don't believe that this would affect you.

Thanks for all replies. Very helpful. I hadn't considered a codicil which seems to be an easier solution than changing her entire will.

Couldn’t you do a deed of variation? When my friend’s mum died, her dad inherited everything but did a deed of variation and passed on a specific amount to my friend. For example, the estate was worth 500k and he used a deed of variation to give her 50l and he took 450k.

I'm in Scotland. DH's GD wasn't included in the will, but he told me to give her "a couple of thousand". I gave her 3k, which is the max you can give in a tax year without incurring tax.

The following tax yr, I gave his son an additional 2k ( on top of what he'd got via his legal rights) as a wedding present from DH, 500 to the GD as a grad gift from him and 500 to a nephew as a wedding present. (It all counted as "my" tax limit, if you catch my meaning, because it wasn't in the will.

Yes. The only reason there wasn't a codicil for DH's will was that he was very poorly during lockdown.

As others have said, you can give more using the 7 yr clause...but I'm in my mid-60s and had my own health issues.

[EDIT]

Sorry, didn't see your latest post before I wrote this

[/EDIT]

"I gave her 3k, which is the max you can give in a tax year without incurring tax."

It's rather more nuanced than that.

There is no "gift tax" in the UK - apart from inheritance tax (IHT) considerations if you die within seven years of making a gift.

So, for example, let's say that you gift somebody £5k in a particular year. You then die six years and 364 days later.

What happens in that situation?

Well, if your executors even notice that amount then it will mean that you are £2k above the limit for that year.

What is the practical consequence of this?

If the executors even notice this amount then it will mean that the tax free allowance you get for your estate of £325k per person or up to £500k if you own a property. Or double those figures if you are a surviving widow/widower and your deceased spouse left everything to you.

So, if you own a home by yourself, instead of being able to pass on £500k tax free you would only be able to pass on £498k tax free (or £998k tax free if you are a widow).
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Rather off-topic but this issue can be more of an issue for the giftee.

The whole thing about it being taxable is much more an issue for the person receiving the gift, especially if you are giving them money on a regular basis.

If you are just giving relatives money out of your regular monthly income to help support them then it is no problem at all. You can give them as much as you like each month provided that you can afford it without affecting your own lifestyle. It will be excluded for IHT purposes and they won't be treated as receiving an income either.

Other situations can all get very complicated and messy.

Let's imagine a wealthy woman who has a younger lover, a "gigolo" if you like.

She helps to support his lifestyle by paying off his credit cards or rent etc and, in return, expects nothing other than ...

In this situation, HMRC would count those as gifts that the gigolo is receiving. However, if the gigolo has several, similar, relationships at the same time (or one shortly after the other) then HMRC would much more likely look at that as income and so expect to receive their cut.

I'll just add that I'll not be taking a gigolo on my teaching pension! 😂

It sounds to me like your mum wants to be able to say to the people: "I left you money in my will" but the ambiguity means she is not responsible for the amount or and doesn't care enough to be certain it actually happens because nothing is in writing. This isn't to suggest she doubts you in any way or that you would ethically do the wrong thing - but are you sure she really wants to give the cousin money or just CREDIT for giving her money? Then it's on you if the cousin does't get it.

She knows your kids will inherit from you anyway.

it's all a bit weird.

Yes i agree and worth thinking about the above

perhaps mum should say now or say to cousins what is happening, “I've asked my daughters to give you some money from my estate” and even define what “little” is.

honestly redrafting a will or adding a codicil is the best way to make things clear and easier for you at a time in the future when you will want to have your energy for grieving and what administering an estate involves, and people being unsure how much of a beneficiary they are. You wont need that!

It would be good to know if there is some sort of context for the cousin's money too. For example - is it perceived that they were hard done by on another bequest that perhaps your mum/her mum or dad/sibling benefitted more from?

Sounds a bit like a legacy family dispute thing that is being kicked into the long grass which your mum is sort of doing something to redress but really not.

If you have 3 DC and Dsis has 2, is she giving to the cousin? Just a percentage quoted in wishes or the will is better. Then everyone inherits and there’s no gifts.

You are not taxed on gifts. You reduce your IHT liability by giving and £3000 pa is excluded from the 7 year rule. You could therefore spread the gifts out. People with the money should write out what they want though and not tell others what to do with their inheritance. It’s about taking responsibility.

@WearyAuldWumman

Where did you get your information on the gigolo tax from? What cut would HMRC demand here?

Surely a deed of variation when she dies is the easiest way? At that point you know how much is in the estate and can redirect it to the children so it would go direct to them?

Having said that, you'd have to check whether you can use that to redirect part of your share, it whether it has to be all of it.

I'm a beneficiary of an elderly aunt's will. I don't need the money and it would tip me into inheritance tax territory if she died today. So unless some of her savings ends up paying for her care over the next few years, I'll be making a deed of variation so that my children get it instead.

You’ll have to ask @Another2Cats …though I’m fairly certain she’s not speaking from personal experience!

Love your username, Wuthering!