Inheritance tax and posthumous gift

[sorryihaventacluetoo]

My FiL died leaving his estate to his spouse, my DH's SM. He has instructed her to gift each of his children a sizeable sum of money (between £20k and £40k) to use as a deposit for a house.

When can she pass on this money without incurring inheritance tax charges?

If she dies within 7 years it may be subject to IHT as part of her estate (less annual allowances for tax free gifts). Although she would also have his df allowance to pass on.

So she could pass on this amount to us now but we would have to pay tax on it if she were to die in that time frame?

So, assuming she survives (as we obviously v much hope she does!) she could gift this money to us now without incurring charges? I'm just trying to get my head around the law, I'm not going to go knocking or begging btw!

In theory yes. But even if she did die within 7 years it is her estate who would be liable not the individuals.

www.gov.uk/inheritance-tax/gifts

I think a solicitor could draw up a deed of variation to the Will, so in effect portions of the money have been left to you and your siblings. That should take it out of step mums's estate

This is one of the situations where you generally don’t want a deed of variation as that will use up the nil rate band whereas a gift from stepmum will be a potentially exempt transfer and after 7 years free of IHT. You need to be sure what will happen though if she dies with 7 years though. Is your DH also a beneficiary of her estate?

Once you’ve got that sorted though you want the gift to be made ASAP to start the 7 year clock goinf

Immediately. The sooner the better.