Gifting kids (some) house deposit

[Marylou62]

My DH is about to get £15,000 from a pension..He wants to give our 3 DC £5,000 each to go towards their future houses..2 DC are hoping to buy this spring..
Discussing it with a close friend she said she thought you could only give/gift £3.000 a year without tax implications..
Any advice please..

From your figures you don’t meet the inheritance tax threshold so you don’t have to worry about the 7 year rule.
So gift away.

Do you and your DH not need the pension money to live off?

@Marylou62

And lets hope the pension company actually pays out before April 5th!!! It's been a 2 year saga!

Even if they don't, then you do the full gifts and utilise £12k (2 of you x current year and prior year £3k exemptions). Leaving £3k as potentially chargeable in what sounds like the extremely unlikely event of his death within 7 years with assets over the IHT threshold.

Certainly don't worry about it!

And definitely no immediate / initial tax implications to the gifts.

It's a very generous thing your dh wants to do. And based on the value of your assets there are clearly no IHT or financial penalties involved if you just gift the money.

But .. are you sure you, or both of you, won't need that money as you get older? Do you both have decent pensions? Will one of you be able to manage financially if the other dies?

Oh, and you don't have to do anything to take advantage of the exemptions.

If you were regularly gifting amounts and expected to have an IHT liability then its worth keeping records to assist the Executors post death.

Chocolate cake & gowns sound good!

The OTHER thing to consider is potential "deprivation of assets" in the event that either of you will need care home provision in the future.

I'm not clear on the full rules in respect of that.

You can give what you like.

You have a personal tax free limit each year of £3,000 to give. This doesn't form part of your estate.

Anything else you give forms part of your estate.

Your personal inheritance tax threshold is £320,000 each. So you can give up to this amount and is not taxed after death for inheritance tax.

After 7 years this amount resets so you can then give another £320,000.

If the amount you gift goes over £320,000 any amount over this in those 6 years incurs 40% inheritance tax (front loaded sliding scale).

My advice to you is get your husband to transfer the £15,000 pension into a joint account in both your names.

Then, from here, you can give the first £6,000 this side of April 5th (tax year) and another £6,000 after April 6th. This uses both you and your husbands £3,000 giving allowance for both tax years.

If, if one of your children is under 18 and has a child's isa you can transfer £9,000 inheritance tax free into their account each year.

Ultimately anything over these smaller tax free amounts will become an amount against your £320,000 inheritance tax threshold. In the event of both of your deaths and you've gone over £640,000 (joint) your estate would pay any tax due. You can also both gift £175,000 each to children from a main residence as an asset.

So the inheritance pot is generous but has to be given in a way to maximise both your allowances.

The clock starts ticking the moment it's transferred and in 7 years it doesn't count anyway.

So the answer is yes. if you give from a joint account, and both you and your husband are in good health you should be more than ok.

There is absolutely no need in your case to be concerned about iht. You are way below the threshold even if the worst were to happen. You can just transfer the £5,000 abs not worry about it

@beautifullymad

You can give what you like.

You have a personal tax free limit each year of £3,000 to give. This doesn't form part of your estate.

Anything else you give forms part of your estate.

Your personal inheritance tax threshold is £320,000 each. So you can give up to this amount and is not taxed after death for inheritance tax.

After 7 years this amount resets so you can then give another £320,000.

If the amount you gift goes over £320,000 any amount over this in those 6 years incurs 40% inheritance tax (front loaded sliding scale).

My advice to you is get your husband to transfer the £15,000 pension into a joint account in both your names.

Then, from here, you can give the first £6,000 this side of April 5th (tax year) and another £6,000 after April 6th. This uses both you and your husbands £3,000 giving allowance for both tax years.

If, if one of your children is under 18 and has a child's isa you can transfer £9,000 inheritance tax free into their account each year.

Ultimately anything over these smaller tax free amounts will become an amount against your £320,000 inheritance tax threshold. In the event of both of your deaths and you've gone over £640,000 (joint) your estate would pay any tax due. You can also both gift £175,000 each to children from a main residence as an asset.

So the inheritance pot is generous but has to be given in a way to maximise both your allowances.

The clock starts ticking the moment it's transferred and in 7 years it doesn't count anyway.

So the answer is yes. if you give from a joint account, and both you and your husband are in good health you should be more than ok.

It’s 325k

@Chasingsquirrels

The OTHER thing to consider is potential "deprivation of assets" in the event that either of you will need care home provision in the future.

I'm not clear on the full rules in respect of that.

That would be if you were about to go into a care home, or already in one, and gave away all you money so that you'd be below the threshold to have the local authority pay your fees It does not sound like it's the situation here, so not a concern.

With total shared assets worth £81k (£50k property and £31k savings) it seems very reckless to be giving away £15k. Unless you both have good pension schemes?

Would also be worth considering chasingsquirrel's comment about deprivation of assets in the event either of you needs care.

@HomeHomeInTheRange

Do you and your DH not need the pension money to live off?

That's a whole other question... We want to help the kids out, we live a quiet frugal (Happy) life. My DH has state pension and 2 other pensions which I would get 50% of should he die before me..I'm younger by 7 years so still working and so is he. (one of the reasons I agreed to the gifts was him still working and managing to save) .We are managing to save £1000 a month and putting it in premium Bonds. I was against giving this money away as I have always had anxiety around money..Grew up poor, really struggled when the kids were little..But we've (and the kids) have had a great life with the little we've had.. So to answer your question.. yes we probably might need it to live off but helping our DCs out in the 2nd most expensive region after London is something we would like to try and do.. £32,000 might not be much to some but it's more than we've ever had.. We don't have a mortgage or debts.. But on saying all this, if he changed his mind and said let's just give the kids £2000 each I'd be relieved.. but it's not my money. I've said too much and should delete this but it's the truth..

Some good advice on this thread.

Something I have always wondered though - how would the tax man even know that you’d given money away seven years ago? Do they examine the past seven years of bank statements?

@StrawberryPot

With total shared assets worth £81k (£50k property and £31k savings) it seems very reckless to be giving away £15k. Unless you both have good pension schemes?

Would also be worth considering chasingsquirrel's comment about deprivation of assets in the event either of you needs care.

But deprivation of assets would only be if they know of care needs at this present time......I mean loads of us may have care needs later down the line....but that’s not the definition of deprivation of assets

See.. Whilst writing my long saga this thread moved on somewhat..I totally agree with you about being reckless giving away £15,000..But it's his pension
I have a pension for a few years now since the rules changed.
(I don't ever remember anyone telling me how important a seperate pension would be..I was a childminder for years earning under the NI threashold and moved jobs quite a lot.)
You are all saying what I feel..
But £15,000 won't make a dent in my life if I outlive my DH by 20 years will it so I sort of agree to helping them out...

I was gifted £10k as a house deposit and absolutely no tax implications for my parents.

@Marylou62 - I'd feel exactly the same. You should view this as joint income and be in agreement over how it is used.

As a compromise, could you suggest keeping the money in a separate pot for the time being and using some of it to help your dcs as and when they're in a position to buy a property? If you live in an expensive area they might struggle to raise a full deposit so may be tempted to blow your gift on a holiday if they have it now (I can imagine that's what one of my adult dcs would do!).

Sorry can I just check something. I understand all parts of IHT law. But is this just something people are ‘bound’ to do morally (and obviously legally). I mean, who would check? Even in the even of the death of a spouse, no-one audits any accounts? Just wondered…

But deprivation of assets would only be if they know of care needs at this present time......I mean loads of us may have care needs later down the line....but that’s not the definition of deprivation of assets

Op has already said her dh is in poor health...

@Marylou62

See.. Whilst writing my long saga this thread moved on somewhat..I totally agree with you about being reckless giving away £15,000..But it's his pension I have a pension for a few years now since the rules changed. (I don't ever remember anyone telling me how important a seperate pension would be..I was a childminder for years earning under the NI threashold and moved jobs quite a lot.) You are all saying what I feel.. But £15,000 won't make a dent in my life if I outlive my DH by 20 years will it so I sort of agree to helping them out...

15k will make more of a difference to you and your partners lives than your children’s.....if they are getting hefty mortgages for expensive homes,over 25 years then an extra 5k is nothing.....maybe you could gift them a smaller amount and keep the rest for yourselves.

The inheritance tax threshold is £325000. Your estate is below so you do not have to worry about being taxed at all on gifts. So give as much as you like without worry.

@Capricornandproud

Sorry can I just check something. I understand all parts of IHT law. But is this just something people are ‘bound’ to do morally (and obviously legally). I mean, who would check? Even in the even of the death of a spouse, no-one audits any accounts? Just wondered…

To get probate you need to submit various forms, I don't know the details but I am pretty sure that HMRC will selectively check a sample, some targeted and others random.

The death of a spouse (1st spouse) where everything is left to the remaining spouse is broadly irrelevant here (assuming both UK resident and domiciled) as it would be exempt ad spousal.

@StrawberryPot

But deprivation of assets would only be if they know of care needs at this present time......I mean loads of us may have care needs later down the line....but that’s not the definition of deprivation of assets

Op has already said her dh is in poor health...

Does your DH have any care needs OP....or is expected to have any shortly? ...... I had assumed not as you said he was still working

[quote StrawberryPot]@Marylou62 - I'd feel exactly the same. You should view this as joint income and be in agreement over how it is used.

As a compromise, could you suggest keeping the money in a separate pot for the time being and using some of it to help your dcs as and when they're in a position to buy a property? If you live in an expensive area they might struggle to raise a full deposit so may be tempted to blow your gift on a holiday if they have it now (I can imagine that's what one of my adult dcs would do!). [/quote]
The 2 DC hoping to buy in the spring have saved like mad..We would only give the money for house deposit when they are in the final stages.
We would keep back any for other DC until they are in a position to buy..

For those of you asking how the tax man would know, when someone dies you have to fill out IHT forms and send them to HMRC and they specifically ask about gifts and require them to be itemised and you have to make a declaration that the information provided is correct.