Inheritance Tax and gifts

[Pebblepaint]

I am executor for an aunt. She has no children but many nieces/nephews and great nieces and nephews.

She's wealthy and generous, probably with family and outside the family. I have no idea what she gives away, but I know she enjoys doing it and does it frequently.

When it comes to making the statement for inheritance tax purposes, how am I supposed to know what gifts she's made in the last 7 years? As I understand it she can only gift up to £3k pa in total in the 7 years before her death, before tax becomes payable, which as a few hundred here and there, wouldn't be a lot to her.

So how would I know, what checks am I expected to make and what happens if I get it wrong?

She needs to understand that, if she does not keep a record of the gifts she makes, with reasons, amounts and payees, her executor will have a lot of work to do.

As well as the £3k limit there are a few other exceptions/exemptions, particularly weddings and civil partnerships. Small gifts under £250 might also fly under the radar.

It's also possible to pay regular amounts out of excess income.

My Mother was similarly generous. She might give me money towards holidays and more than once, over 5+ years, gave £1000 towards a car I'd bought.

My sister who lived nearby did all her shopping and stuff including arranging household repairs etc for which Mum reimbursed her. From time to time she co-mingled gifts with the reimbursements.

We had a hell of a game going through 7 years worth of bank statements trying to match up cheques she'd issued with our own records. In the end the professional executor advised that there was no way HMRC would accept that it all fell below the limits and a significant sum was added to the estate for IHT. She was able to play around with other stuff so that inthe end little or no IHT was payable but she earned her fee several times over with the time and effort it took.

Our solicitor said there is no need as executors for us to go through years and years of bank statements where records haven't been held. We just have to show we've done what might reasonably be expected and filled stuff in in good faith. I won't be going through seven years of my mum's several banks accounts to find out who she has given money to. We will note down the gifts we are aware of but otherwise that's my due diligence.

Not advising you one way or the other as you will want to follow your own solicitor's advice, but I am guided by what can reasonably be expected of someone.

(And my mum purposefully didn't leave records of gifts when she left intricate records of everything else, so I have drawn my own conclusions from that )