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Original poster

Inheritance tax and legal gifts to family.

78 replies

NENew · 08/04/2023 13:59

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 Inheritance Tax works: thresholds, rules and allowances

Inheritance Tax (IHT) is paid when a person's estate is worth more than £325,000 when they die - exemptions, passing on property. Sometimes known as death duties.

https://www.gov.uk/inheritance-tax

OP posts:
Original poster
NENew · 08/04/2023 16:58

So, to go back to my question, for clarification.

As my parents estate is likely to be under the inheritance tax bracket ( they have £650,000 plus the house £200,000), they can give money to their DGC’s. There are no limits, but I except this to be a couple of thousand, maybe five each, not tens of thousands.

I know that the LA may need to assess in the future but at the minute my DM has no care needs, with no medical needs. I would hope the ruling would be that there is no deprivation of assets since she is well.
Of course we know long-term plans might have to change, with any gifts in later years reflecting current medical information at the time.

OP posts:
idontlikementhols · 08/04/2023 17:01

There's lots of excellent advice available, if you pay for it. Go to a solicitor.

ArcticSkewer · 08/04/2023 17:02

SheilaFentiman · 08/04/2023 16:50

“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.

Deprivation of assets doesn't apply to inheritance tax. Inheritance tax never controls how much you can give, just how much tax might be due once you die. Give what you want. Your estate might have to pay some tax on it, that's all, if over the threshold (often a million £ for married couples with an average priced house)

Yes, local council might be interested in deprivation of assets in specific circumstances, but they can't just stick their beak in. They would only be interested once asked to pay for care, not if the person had died without needing council funded care. And even then, they can't just unilaterally decide that a fit and healthy person couldn't give away hundreds of thousands if they wanted to. There isn't a council assessment on every person in the UK and their gift giving habits.

In ops case, it's something to be aware of, but nothing to worry about if the estate is £650k+ and they just want to give away say £20k

ArcticSkewer · 08/04/2023 17:06

NENew · 08/04/2023 16:58

So, to go back to my question, for clarification.

As my parents estate is likely to be under the inheritance tax bracket ( they have £650,000 plus the house £200,000), they can give money to their DGC’s. There are no limits, but I except this to be a couple of thousand, maybe five each, not tens of thousands.

I know that the LA may need to assess in the future but at the minute my DM has no care needs, with no medical needs. I would hope the ruling would be that there is no deprivation of assets since she is well.
Of course we know long-term plans might have to change, with any gifts in later years reflecting current medical information at the time.

That's fine. You don't need legal advice for that. I really wouldn't give it a moment's thought beyond how best to invest it eg lifetime isa. A poster upthread made a good point about the £450k price limit on house purchase.

ArcticSkewer · 08/04/2023 17:07

Have they made a will btw? Makes things easier. If they did want legal advice maybe they could tie it in with the will writing?

BeatriceBatchelor · 08/04/2023 17:09

this is called deprivation of assets and the government can claw back the money

How? If granny has given money to grandchild who has used it for a house deposit, how would it be "clawed back"?

VerityUnreasonble · 08/04/2023 18:05

NENew · 08/04/2023 16:58

So, to go back to my question, for clarification.

As my parents estate is likely to be under the inheritance tax bracket ( they have £650,000 plus the house £200,000), they can give money to their DGC’s. There are no limits, but I except this to be a couple of thousand, maybe five each, not tens of thousands.

I know that the LA may need to assess in the future but at the minute my DM has no care needs, with no medical needs. I would hope the ruling would be that there is no deprivation of assets since she is well.
Of course we know long-term plans might have to change, with any gifts in later years reflecting current medical information at the time.

Just to clarify, although DM has no foreseeable care needs what about DF? You mention one parent being more well than another.

If DF does have foreseeable care needs then you just need to consider how separate their finances are (although the amounts you are talking about I don't think would be considered deprivation anyway!)

If we were talking bigger amounts your DM who has no foreseeable needs could give away as much of "her money" as she wanted - so anything held in her name. If money is in joint accounts, half would be considered hers but it might be sensible to separate it into individual accounts prior to gifting it to make it clear it was "her money" not the money of the person who might need care.

Again I don't think this matters in your case as the amounts are tiny compared to the total estate and your parents aren't likely to be needing a financial assessment for care unless something goes horribly wrong somewhere but maybe useful for others to be aware of.

Luckydip1 · 08/04/2023 18:16

BeatriceBatchelor · 08/04/2023 17:09

this is called deprivation of assets and the government can claw back the money

How? If granny has given money to grandchild who has used it for a house deposit, how would it be "clawed back"?

Firstly, it's a criminal offence and secondly, the LA will treat you as if you still have the money.

SheilaFentiman · 08/04/2023 18:19

“In ops case, it's something to be aware of, but nothing to worry about if the estate is £650k+ and they just want to give away say £20k”

Sure, but I was specifically responding to your point about giving away hundreds of thousands.

ArcticSkewer · 08/04/2023 18:50

SheilaFentiman · 08/04/2023 18:19

“In ops case, it's something to be aware of, but nothing to worry about if the estate is £650k+ and they just want to give away say £20k”

Sure, but I was specifically responding to your point about giving away hundreds of thousands.

My post with the quoted paragraph about inheritance tax? That's irrelevant to a local authority financial assessment.

SheilaFentiman · 09/04/2023 00:35

Aaargh.

I give up trying to explain.

good luck, OP.

Pythonesque · 09/04/2023 13:30

In terms of inheritance tax, another aspect of gifting that can be useful to understand, is that if their income is greater than their actual needs now, they can make regular gifts from surplus income that would also be disregarded for inheritance tax purposes. (the "regular" bit may actually be relevant, not sure)

Original poster
NENew · 09/04/2023 15:11

Pythonesque · 09/04/2023 13:30

In terms of inheritance tax, another aspect of gifting that can be useful to understand, is that if their income is greater than their actual needs now, they can make regular gifts from surplus income that would also be disregarded for inheritance tax purposes. (the "regular" bit may actually be relevant, not sure)

Thank you, funnily enough we were just discussing this.

OP posts:
ArcticSkewer · 09/04/2023 16:18

NENew · 09/04/2023 15:11

Thank you, funnily enough we were just discussing this.

Show quote history

There's quite a bit of associated paperwork if you want to use the surplus income route for inheritance tax exemptions (not that it sounds like you need to).

Plenty of advice online eg https://www.gabyhardwicke.co.uk/briefing-notes/inheritance-tax-exemption-for-gifts-out-of-surplus-income/

Inheritance Tax Exemption for Gifts Out of Surplus Income

https://www.gabyhardwicke.co.uk/briefing-notes/inheritance-tax-exemption-for-gifts-out-of-surplus-income

anyolddinosaur · 09/04/2023 16:49

The gift rules are here https://www.gov.uk/inheritance-tax/gifts if you think your estate might be over a million and you wont survive 7 years.

Note that you can give regular gifts out of income as long as it doesnt affect your standard of living.

Inheritance tax exemptions can always change as can the value of someone's estate - especially if they need to fund their own care.

Personally we gave our child a substantial deposit for a house, reckoning we'd survive 7 years. Average stay in a care home is less than 3 years, I'd suggest they make sure they have a minimum of 200k left. We have more than that so we can fund surgery if we need it. A hip replacement at 10k, cataract surgery could be 4k per eye.

How Inheritance Tax works: thresholds, rules and allowances

Inheritance Tax (IHT) is paid when a person's estate is worth more than £325,000 when they die - exemptions, passing on property. Sometimes known as death duties.

https://www.gov.uk/inheritance-tax/gifts

anyolddinosaur · 09/04/2023 16:55

Crossposted 😃

Any unused portion of the annual exemption for a particular tax year can be carried forward to the next tax year only. So if they didnt gift much last year they could gift 6k each this tax year with no potential issues.

Tryingtokeepgoing · 09/04/2023 17:49

Luckydip1 · 08/04/2023 18:16

Firstly, it's a criminal offence and secondly, the LA will treat you as if you still have the money.

Show quote history

Giving away money isn’t a criminal offence - what a ridiculous idea. Not telling the truth when applying for local authority support for care costs is the criminal offence. But as yet there’s no indication that the OPs parents are going to even need care, let alone need local authority support to pay for it, so there’s really no need for this level of scaremongering.

If the OPs parents wish to give away a few thousand pounds, or frankly even a few tens of thousands of pounds, there’s really no problem at this stage and given their assets.

If, and it’s a big if, they do need care in 10 or so years time and have given away hundreds of thousands of pounds between now and then it’s still possible they won’t need local authority support. If, and it’s another big if, they do then they’ll have to be upfront about the gifts, and then and only then might the local authority determine that deprivation of assets has occurred, in which case they might treat the OPs parents as if they still had the cash.

Even then, the OPs parents have their house which, assuming one of them is still living in, would have a charge put on it rather than a forced sale giving access to funds more easily than trying to reclaim money from the recipients (which can only ever be done on a voluntary basis - the local authority has no power to make a recipient give it back)

Beenalongwinter · 09/04/2023 18:53

caringcarer · 08/04/2023 16:26

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.

This is correct but the £3k can be backdated one year ie £6k first year.

In addition, any amount may be gifted
Out of excess Income if paid as a regular sum without reducing your normal standard of living. ( from income not capital)

Luckydip1 · 09/04/2023 19:04

@Tryingtokeepgoing knowingly giving away assets to defraud the LA of funds for your social care is a criminal offence. The OP needs to consider the implications of giving money away that they might otherwise need for their social care, it's not scaremongering.

ArcticSkewer · 09/04/2023 19:26

Beenalongwinter · 09/04/2023 18:53

This is correct but the £3k can be backdated one year ie £6k first year.

In addition, any amount may be gifted
Out of excess Income if paid as a regular sum without reducing your normal standard of living. ( from income not capital)

Show quote history

Any amount can be gifted. Full stop.

I really wish people would stop this silliness about some government limit to gifts.

Sometimes there are tax implications. That's what the £3k exemption is referring to, that's all.

ArcticSkewer · 09/04/2023 19:31

Luckydip1 · 09/04/2023 19:04

@Tryingtokeepgoing knowingly giving away assets to defraud the LA of funds for your social care is a criminal offence. The OP needs to consider the implications of giving money away that they might otherwise need for their social care, it's not scaremongering.

It pretty much is scaremongering in the context outlined by op.

And in most contexts, to be frank.

I've been given gifts worth hundreds of thousands (yes, lucky me). I personally gift tens of thousands per year to my kids. I don't plan on dying any time soon or needing care homes. If I do die in the next 7 years, hey there might be some tax due .. big deal. Hopefully not though as I intend to keep my estate well below limits and die with as little as possible to my name.

Some of these posts are just the usual mumsnet pantwetting scaremongering .... oooh the government is going to get you blah blah. It's perfectly legal.

Lilyofthevalley23 · 09/04/2023 19:41

I am a professional in this field and can confirm that there is a lot of mis-information on the Internet and on this thread.

If someone is fit and healthy when they make gifts, then there will be no deprivation of assets involved providing the reason for making the gifts was not to avoid care fees.

As others have pointed out, there are no limits on gifts, just potential tax liabilities if you die within seven years with an estate in excess of the limits. Only then do the £3,000 p.a. (or £6,000 over two years) limits apply assuming the gifts can't be shown to be out of regular income.

Oblomov23 · 09/04/2023 19:42

I'd still encourage them to gift £3k annually, at least. It just makes sense.

Luckydip1 · 09/04/2023 19:47

@ArcticSkewer Just raising a valid point not scaremongering.

Original poster
NENew · 09/04/2023 20:22

Lilyofthevalley23 · 09/04/2023 19:41

I am a professional in this field and can confirm that there is a lot of mis-information on the Internet and on this thread.

If someone is fit and healthy when they make gifts, then there will be no deprivation of assets involved providing the reason for making the gifts was not to avoid care fees.

As others have pointed out, there are no limits on gifts, just potential tax liabilities if you die within seven years with an estate in excess of the limits. Only then do the £3,000 p.a. (or £6,000 over two years) limits apply assuming the gifts can't be shown to be out of regular income.

Thank you!

OP posts:
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