Inheritance tax and legal gifts to family.

[NENew]

Parents with an estate of in excess of £650,000. They own a house outright at around the £200,000 mark.

They are keen to help their grandchildren financially, especially to get on the property ladder. One DGC already owns a small, cheap house, the others don't.

I'm using this guidance but would appreciate some simple advice.
https://www.gov.uk/inheritance-tax

What can my parents gift? Are there any risks?

(One parents is fit and well, the other not so much.
I'm thinking at this point dedication of assets would not be applied due to one parent being fit and well.)

Thank you.

How old are they? What assets is the other £450k invested in? Have they done any estate planning previously or made any gifts in the last 7 years?

They can give away as much or as little as they want, and as the overall estate seems to be below £1million (£325000 x 2 people plus house value of £175000 x 2 people, so £500000 each) there won't be any IHT due anyway.

If the grandkids then put it in a lifetime isa (lisa) yearly they get an extra 25% top up from the government towards a house purchase.

Thank you for responding.

Parents are 80.
I think any money other than the house will be in savings accounts.

They haven't planned anything financially.

They sold a house in Spain about 5 years ago and gave each grandchild (3) £5.000.

They lived in Spain, with residency for 15 years prior to that, with no property here.

What are your concerns with inheritance tax exactly? It doesn't seem like any would be due, and there are no tax rules on how much of your own money you can give away.

You're right to also think about deprivation of assets but if that doesn't seem relevant then nothing to worry about.

Just bear in mind the costs involved in elderly care. I have two family members each paying out £2000 per week because they cannot manage to live without support and want to stay in their own homes . It adds up and quickly eats into savings

Yes, we are aware. Currently DMiL is paying £6,000 per month for her own care.

My DM has no health issues at this point. Can the LA reasonably expect that she doesn't give her DC’s or DGC’s any monetary gifts.

I'm not talking ten’s of thousands, but a maximum amount, with no repercussions, to help DGC’s.

Thanks, yes I've read that through the link I posted. It is all so confusing though, I hoped for some plain speaking advice.

No, if the parents are married then the tax allowance 'adds up' and is used when the second person dies. So it's a max of £1mil., although in this case it will be less as the house value is less.

So the estate passes from spouse to spouse with no inheritance tax due, then when second spouse dies you can use both the allowances together on the estate.

If you are not even talking tens of thousands you really have nothing to worry about!

The local authority would only have an interest or say once they are asked to start finding. It sounds like there are hundreds of thousands to spend before then

Slightly incorrect information about IHT threshold. If the house is worth £200k the maximum IHT tax relief you can claim is £200k not 2 x £175k.

If you give away money to your kids and then don't have money to pay for your own social care this is called deprivation of assets and the government can claw back the money.

funding not finding!

I thought gifting was £3k per annum. I do it. Give my 3 DC £1k each per year. I can give £250 gifts to others not the same people so dgc get the £250 each. I have been doing this for several years. I think the rules are £5k gifting allowed for a wedding. Someone might come and tell me I am wrong and it has changed but DH is an accountant and he told me this is what I can gift. He gifts the same too.

Although max purchase price with a LISA is £450k which doesn't get you much in the South East.

Nope.
You can gift hundreds of thousands of pounds if you want. Who are the government to control how you spend your own money?

The rules you talk about do exist but are only relevant if you die and your estate is over the max. which is up to a million, before IHT rules even apply.

It does show how the guidance isn't straightforward. Lots of differing advice here and I know will relate to individual circumstances, which is why I've included ours.
@caringcarer, these are the figures the government guidance gives. I hadn't read that as per person as the giver, which is useful to know. Forgive me for asking, but is your estate likely to be more than a million though which would make a difference?

You do need to consider deprivation of assets if DM is already paying for care. It doesn't sound like they are considering gifts that would take them near the thresholds (currently 24k) but if your DMs savings did get down to that level (or 100k if the government ever do change the threshold like they've said) then they would look at any money gifted to family and if this was something reasonable and proportionate that they would have always done or if it has been done to avoid paying for care.

Gifting a few thousand when you have 100s is unlikely to raise any concerns, gifting 100k might.

Oops apologies, I see it is MiL that is paying for care not DM. You do still need to consider deprivation of assets if you can reasonably forsee care costs in the future (so have a diagnosis of something that is likely to deteriorate for example rather than just getting older).

“You can gift hundreds of thousands of pounds if you want. Who are the government to control how you spend your own money?”

I think gifting at this level might be seen as deprivation of assets, given that the couple could reasonably expect one or both of them to have care needs in the near future.

OP, the reason you can’t find clear guidance is that deprivation of assets is done on a fairly case by case basis, with intention taken into account.

however, in my view (IANAL) if your parents were gifting at around the IHT levels of a few £k per annum, I think that deprivation of assets wouldn’t be a concern.

DMi LAW is the one paying for care, not my parents. DM is fit and healthy.

Sorry, crossed post too!

Sorry, I forgot to add, so the 'rules' on £3k per year gifts is only about the 'tax free' amount and only on gifts in the last seven years.

It just means that if you gave away more than £3k per year in the 7 years before you died, and your estate including those gifts was over the limits (£325000 + value of house up to £175000 x 2 if you can use both spouses allowances on the death of second spouse, so a million)

then..

in that case, tax might be due on those gifts.

So if you are young and healthy it's not worth worrying about. If your combined estate is under £1mil. it's not worth worrying about. Give what you want, do what you want.

And for op, I can't see any reason at all to worry if it's an estate of say £700000 with £200000 as house, and we are only talking about giving away less than 10s of thousands

No problem! I should learn to read properly in the first place!