Gifting large sums to Adult children

[Watdaheck]

Hi, we are in the fortunate position of being able to gift approx £50k to each of our 4 adult children. We’ve never been in a position to gift them money before so no idea of what we should be thinking about I.e tax implications or anything else. Can anyone advise. Thanks

I think it’s all fine as long as you don’t die or need care in the next seven years.
I am open for being adopted OP😉

Make sure you update your will to specify that the gifts are separate any future inheritance.

You should write a letter to each of your dc to say this is a gift.
Also it's fine , i.e no tax implications for 7 years before you die. If you die within that time period, there's a graduated tax amount that needs to be repaid to Hmrc

Why would you need to do this?
And why should you write a letter to say it is a gift?

(I’m in a similar position so watching with interest)

Watching too

It depends what other bequests there are in the will but if you intend the gift to be in addition to any future inheritance, rather than an advance on inheritance, you need to spell that out. Especially if for any reasons, gifts between siblings are not equal.

My children will be my sole beneficiaries and it will be spilt equally between them and they will both receive the same monetary amount as a gift.
I don’t understand why a gift now has a bearing on future inheritance.

We don’t know how big OP’s estate is, so there may be no inheritance tax to pay if she dies within seven years.

Are they all self sufficient?

If any are on any means tested benefits theirs will be eaten up as their benefits will stop ( mostly)

They will be taxed on the interest on the money once it is theirs - interest over £2k a year for basic rate taxpayers.

Presumably neither of you are in ill health or frail in such a way as to make a care home necessary in the near future? And if you are you have plenty left over for care bills.

The gifts will be included in your estate for IHT purposes if you die within 7 years and your estate is big enough for IHT. And you can have given £3k a year within your n rate band anyway.

However: gifts from ‘surplus income’ do not count.

I’d recommend reading the Moneyhelper website (It was set up by HM Government… so you have already paid for it through your taxes !)

This explains the rules around gifting and inheritance tax

https://www.moneyhelper.org.uk/en/family-and-care/death-and-bereavement/gifts-and-exemptions-from-inheritance-tax#:~:text=Back%20to%20top-,What%20is%20a%20Potentially%20Exempt%20Transfer%3F,a%20period%20of%20seven%20years.

My mum has done this a few times and we do it with our DDs. There is a sliding scale before it can be exempt from IHT. You have to survive 7 years. Beware Rachel Reeves has PETs (potentially exempt transfers) in her sights apparently so I would do a letter saying these are gifts fairly quickly before she starts making gifts taxable.

We give our adult kids regular payments using the ‘normal expenditure out of income’ exception then even if we die within 7 years it doesn’t matter. You can google it or use AI for details.

Weve also given lump sums. We don’t do a letter but we record it and email the info. The dates are also on our bank accounts obviously.

The letter protects the recipient too e.g. if they want to buy a house and use the gifted money for the deposit. So then you can't say down the line that you want the money back. So they have the letter saying it is a gift, it isn't a loan.

The ‘sliding scale’ for IHT only kicks in over and above the £325k allowance so you’d have to give that much away in one tax year first.
The £200k would always be liable to full IHT within the 7 years until it drops off the table.

Gifting from surplus income does NOT count for Inheritances or even pension lump sums, it HAS to be from regular income so it could be argued that even a yearly UFPLS amount from a pension wouldn’t count as income.

Is your estate likely to be over the £1million allowance given to couples who also own property? If not then non of this even matters.

@Watdaheck Depending on age of dc, if they use the money for house deposits, there will be a money laundering check and you will need to certify the money is a gift and not a loan. We have gifted much more than this, and expect to live for the 7 years currently required. Ours wills leave everything to dc so not altered wills. If they invest the gift, they pay tax if it’s due on the interest. We have no tax to pay.

Thanks to you for your input and advice. Seems fairly straightforward thankfully, in our early 60s we do expect to live (fingers crossed) beyond the 7 years and as all 4 have good jobs/ careers I’m doubtful there would be any issues regarding benefits. Also our wills basically split everything 4 ways so again, hopefully, no issues there.

My dad kindly gave me 100k recently as it was in an extra pension pot that he could have passed on inheritance tax free, and now it’s no longer protected he decided to gift it early as he didn’t need it. Just sent it via bank transfer. My parents also gift me and my child £3k a year as they don’t count towards inheritance tax

Watching with interest. My DM is planning on giving DS some money specifically so that he can pay his tuition fee for a MSc. She will email him to state what she is doing - does she need to use the term ‘gift’ or is this not actually a gift as it’s for something very specific? Is it fine for her to just say something like ‘I’m giving you £x to cover your tuition fees for your MSc in y at z’? Or does it not matter about the actual wording? Thanks

@purplewibble A gift is a gift. No one cares what it’s spent on except a mortgage company if its for a house deposit. She just needs to note what she gave and when and keep a record of it. Copy of bank statement will do. Your dc just spends it. No IHT payable if she stays alive for 7 years. Unless labour mess this up of course.

We do the same. We gave them £50k each 6 years ago and make regular payments out of income.
We're not wealthy and will probably be below IHT anyway.
Main reason for a letter is if they are likely to use it for a house deposit. We said the money was a gift not a loan with no conditions attached.
When they bought houses some time had passed and they didn't need the letter, just proof the money had been theirs for a period of time.