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Original poster

Being gifted 100k, now what?

28 replies

Mellomarsh · 15/01/2023 16:34

Okay, completely first world "problem" but here we are...

My dad is about to have a pretty big payday (work related and not inheritance). So because of this he has said he would like to gift my husband and I £100k which I am pretty speechless about! We have a young family and are in the process of moving house so this will be a massive help (not enough to clear our mortgage but obviously a significant dent).

Anyway, so what I wanted to ask wise MN's was are there any tax implications for us if we are gifted this amount? And should we use this to clear our mortgage? Especially with rates increasing as they have done. We don't have any other debt, and roughly 10k in savings.

Thanks.

OP posts:
LIZS · 15/01/2023 16:37

No tax implications directly for you but it would be in excess of the annual gift tax free allowances. If he were to die within seven years the value, or a part of it, might revert to his estate for Inheritance Tax assessment.

Blog34 · 15/01/2023 16:45

You/he keep a record of the date of the gift. If he dies within 7 years, you won't be asked to pay the tax (assuming he hasn't given other large gifts to anyone) but it will be thr first thing that counts against the nil rate band of his inheritance tax nil rate band so could have consequences for his estate/beneficeries

Blog34 · 15/01/2023 16:46

And I would do mortgage and/or pensions

OnMyWayToSenility · 15/01/2023 16:49

Save some, pay 10% of your mortgage per year... not sure if you can put a lump sum in without a penalty?

Isa max out

Invest a small part

Pension payments

Keep some for a rainy day in an easy access ac

Dyrne · 15/01/2023 17:09

As PP have said, the only tax implications are if he dies within 7 years of giving the gift; and then it may be taken into account as part of the estate for calculating any inheritance tax due on the estate.

Lumping it all into the mortgage isn’t a terrible idea (just keep an eye on any early repayment penalties); but I’d think about the following first:

  1. Do you have a decent emergency fund? You have £10K, is that enough to cover 6 months worth of expenses? If not, I’d give this a boost.

  2. How are your pensions looking? Are they suitably healthy and on track to give you what you want for retirement? Possibly worth giving it a boost, especially as this gives you additional tax benefits.

  3. Do you want to tuck any away for the DC to give them a head start with driving lessons/Uni costs/house deposit?

  4. Do you have any appliances/cars on their last legs that you could do with replacing before being stuck with costly repairs?

ArcticSkewer · 15/01/2023 17:11

if you divorce, your husband will get half of it. I'd put it in the children's junior isa accounts a bit every year

Tippexy · 15/01/2023 18:12

LIZS · 15/01/2023 16:37

No tax implications directly for you but it would be in excess of the annual gift tax free allowances. If he were to die within seven years the value, or a part of it, might revert to his estate for Inheritance Tax assessment.

Genuine question - how would HMRC know?

I know this is the law but I have never understood how it works.

Is it standard for them to go through the past seven years of bank accounts once someone dies?

LIZS · 15/01/2023 18:14

The executors have a duty to declare and potentially go back through statements.

heartbeatacrossthegrass · 15/01/2023 18:15

ArcticSkewer · 15/01/2023 17:11

if you divorce, your husband will get half of it. I'd put it in the children's junior isa accounts a bit every year

God, I'd be so pissed off if my DH did this instead of paying down our mortgage just in case we ever got divorced. Unless your intention is for your DC to have it all as soon as possible I'd think very carefully before going down that route.

ArcticSkewer · 15/01/2023 18:16

Tippexy · 15/01/2023 18:12

Genuine question - how would HMRC know?

I know this is the law but I have never understood how it works.

Is it standard for them to go through the past seven years of bank accounts once someone dies?

Show quote history

it's standard in estates over £3 million.
Otherwise... I have always wondered the same thing. But £100k is a fairly large amount!

ArcticSkewer · 15/01/2023 18:17

heartbeatacrossthegrass · 15/01/2023 18:15

God, I'd be so pissed off if my DH did this instead of paying down our mortgage just in case we ever got divorced. Unless your intention is for your DC to have it all as soon as possible I'd think very carefully before going down that route.

Show quote history

He'd be even more pissed off if he had to share it on divorce.

50% of all marriages end in divorce
I've seen so many people lose half their inheritances (and the other person keep their future inheritance)

Why would you be pissed off if your kids get the money?

antipodeancanary · 15/01/2023 18:23

Tippexy · 15/01/2023 18:12

Genuine question - how would HMRC know?

I know this is the law but I have never understood how it works.

Is it standard for them to go through the past seven years of bank accounts once someone dies?

Show quote history

Yes they do

ArcticSkewer · 15/01/2023 18:35

antipodeancanary · 15/01/2023 18:23

Yes they do

Show quote history

How do you know, @antipodeancanary ? Do you work for hmrc?
I know it's automatic on large estates over £3million.
I always imagined you'd be quite unlucky to be audited for a bank account search otherwise (unless on pension credit)
Other things perhaps are easier eg house sales, tax returns

Lovemydaxie · 15/01/2023 18:48

When sorting probate for my father's estate, I was executor, the solicitor asked if my father had made any financial gifts in the last seven years. You could lie I suppose, but the HMRC could investigate. I think that would be unlikely on relatively small estates but not impossible if there was a good reason.

ArcticSkewer · 15/01/2023 18:52

I'm just curious really. My mother changes bank account regularly and I wouldn't know about gifts offhand.

For op, it's a big risk to lie over £100k

heartbeatacrossthegrass · 15/01/2023 19:31

It's not about being pissed off that your kids will get the money. It's the principle. I wouldn't sign a prenup either. To me a marriage is a legal and financial partnership as much as a romantic one and when one person starts trying to protect assets in case the other ever manages to get their paws on it it's not exactly a symbol of trust is it. Whoever was inheriting the money, I'd want us to have a joint conversation and agreement about what to do with it.

Andanotherone01 · 15/01/2023 19:36

My aunt gifted us £100K recently. She is wealthy and banks with Coutts. Anyway she had legal advice from them and had a letter of gift drawn up. Absolutely no tax implications, as you can gift up to £350K without having to pay inheritance tax should the person who made the gift die.
We are using the money to buy a larger property but if we weren’t, I would definitely pay off as much mortgage as possible.

ArcticSkewer · 15/01/2023 19:38

heartbeatacrossthegrass · 15/01/2023 19:31

It's not about being pissed off that your kids will get the money. It's the principle. I wouldn't sign a prenup either. To me a marriage is a legal and financial partnership as much as a romantic one and when one person starts trying to protect assets in case the other ever manages to get their paws on it it's not exactly a symbol of trust is it. Whoever was inheriting the money, I'd want us to have a joint conversation and agreement about what to do with it.

Seen too much, too many mid 40s couples, to fall for that.

Sorry. It doesn't work that way. They are totally honest and trustworthy and reliable, until they are not. Then the depths people sink to is shocking. Regardless of promises made.

I'd never advise anyone to invest £100k in a joint account or investment without the other partner doing the same or similar.

Giving it to the kids is just one solution. Not that there are many options. Spend it on holidays? School fees?

Thighlengthboots · 15/01/2023 19:43

Genuine question - how would HMRC know

They are relying on people to be honest- just like with tax returns. They cannot practically check every single person's probate paperwork in the country (just like they cannot audit everyone's tax return) but if there were any suspicions/queries raised by others or they did a random audit of the estate and went through the paperwork and it had not been declared then you'd likely be fined/prosecuted for tax evasion. People who have not declared capital gains tax by selling 2nd properties and not declaring it have actually had prison sentences handed down so its really quite serious.

Original poster
Mellomarsh · 15/01/2023 19:56

Thanks all, I appreciate people taking time to reply.

I haven't ever been in the position of being gifted any sum of money before so 100k feels totally alien!

He's under 60, and no crystal ball - but the odds are well in favour of him being with us for far longer than 7 years so any inheritance tax implications wouldn't be an issue. Plus I wouldn't want to try and do anything untoward to avoid this if that happened.

Although I don't know details, he is planning to put some money into a trust for both dc in addition to our gift. (We do save regular in junior s&s isa, though these are small regular deposits to be fair). So it doesn't feel a priority to add in more to these as it stands - or maybe I'm wrong there..

I know we don't ever plan to get divorced but this isn't something I'm worried about, but I do appreciate it being flagged up. Like previous posters have said if the shoe was on the other foot I'd be seriously annoyed if husband tried to "ringfence" it from me in anyway. But each to their own.

In terms of the mortgage, we are at the stage of being able to adjust the amount we borrow for our purchase so no early repayment charges but I guess you've got me thinking if putting the whole 100k is the right move.

We probably could do with a second car as eldest dc starts school so maybe we should use some to buy a little run around without having to take on any credit.

I don't really know much about my pension projections (don't shoot me!) But maybe I should take some advice about that. I wonder what people would suggest if it was pension Vs investments?

OP posts:
Original poster
Mellomarsh · 15/01/2023 20:00

Andanotherone01 · 15/01/2023 19:36

My aunt gifted us £100K recently. She is wealthy and banks with Coutts. Anyway she had legal advice from them and had a letter of gift drawn up. Absolutely no tax implications, as you can gift up to £350K without having to pay inheritance tax should the person who made the gift die.
We are using the money to buy a larger property but if we weren’t, I would definitely pay off as much mortgage as possible.

My dad has a meeting with Coutts in the next few weeks so he will get some advice I'm sure.

Is the 350k tax free gift in his lifetime? I assume it doesn't include things like putting money in trusts or does it?

OP posts:
Andanotherone01 · 15/01/2023 20:13

I’m definitely not an expert but I don’t think it includes trusts as I know my aunt also has some set up and they pay out regularly.

Iwritethissittinginthekitchensink · 17/01/2023 20:48

Your pension is a type of investment. It will depend on when you want to access an investment eg are you saving with a particular timescale or goal in mind (obv with a pension you won’t be able to access the money til a certain age). You might want to consider upping regular pension contributions via your salary instead of a lump sum, eg if you’re employed and your employer would match contributions etc - you could use your dad’s money to ease costs in other areas to allow you to up your monthly pension payments.

Really best to see a financial adviser so you understand all your options. It’s free to have an initial chat/quotes and it’s worthwhile doing a pensions review anyway if you’re not sure on where you stand with that.

No one plans to get divorced, and not many people anticipate dying early. My DH died out of the blue at 28 and my dad was near to death after a surprise stroke at 62. These things happen! Make sure you’re covered… your future self will thank you if any surprises happen.

gogohmm · 17/01/2023 20:57

I would max out the kids junior isas this year (assuming you get it before 6th April) and next (after 6th April) I would max out an isa for you this year and pay down 10% of your mortgage (typically this is the most you can do each year without penalty) then again next year and so on