Inheritance

[NC676767]

Excuse the title thread, just looking for some advice. Name changed as I know the stick I’ll get for even mentioning the I word.

Currently in a situation where PILs want to gift us some early ‘inheritance’ - but we’re unsure of which way to go next? They want to gift us say 30k, I’m assuming they can’t just gift it us without paying tax or us paying tax? As they’ve said the limit is 3k per year for tax free? I’ve not got any idea and whenever I seem to look online it just mentions 3k, there will be a solicitor but wondered if anyone had been in the same situation to explain how it all works. Thank you in advance

As far as I understand they can give you any amount (over £3k) but it would be subject to inheritance tax if they died within 7 years. A £3k gift would be tax free. This site explains it.

Thank you! That does explain it better than the sites I ended up on!

It will only become taxable if they die within 7 years, it's tapered though so if they die in say 6 years you pay less tax on it than if they died next year.

carolebaskinfedhimtothetigers

That isn't quite right. The gifts are taken from the estate first. The taper relief only kicks in if all of the nil rate band has been used up.

It is quite confusing and frequently misunderstood

If they are able to make the gift out of income (rather than by depleting accumulated wealth) and are willing to make it over a few years (say £10k a year) then it could potentially be argued as a regular gift out of income and this would be exempt from IHT.
www.gov.uk/inheritance-tax/gifts mentions this very briefly and www.canadalife.co.uk/adviser/ican-academy/briefing-notes/estate-planning-trusts/gifting-as-part-of-normal-expenditure-out-of-income has quite a good explanation (just near the top of my Google search).

My parents gave my brother and I £5k a year on our birthdays for a number of years on this basis (happily they are still alive so the 7 year clock would be ticking over anyway).

Yes. We were advised you could gift any amount and no tax unless you die within seven years.

If there's any chance either of them are likely to need care in the next few years then the Local Authority could look upon it as deliberate depletion of assets. There's no time limit for that, the LA can potentially go back further than seven years.