Gifts and inheritance tax

[Redrocky]

If I pay for DC's wedding, does that count as a gift for inheritance tax purposes, or is that just spending my own money?

What about if grandparents did it?

If you have enough money to be worried about paying IHT when you die, then you have enough money to pay towards your DCs wedding!
From Gov website
*Gifts for weddings or civil partnershipsEach tax year, you can give a tax free gift to someone who is getting married or starting a civil partnership. You can give up to:

• £5,000 to a child
• £2,500 to a grandchild or great-grandchild
• £1,000 to any other person

If you’re giving gifts to the same person, you can combine a wedding gift allowance with any other allowance, except for the small gift allowance.
For example, you can give your child a wedding gift of £5,000 as well as £3,000 using your annual exemption in the same tax year*

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

Notwithstanding PP's comment - there are specific tax-free gifts in relation to wedding from parents & grandparents.

I'm not talking about giving them money though, but paying for the wedding, as would have been expected of the bride's parents a couple of generations ago, even if it's less common now.

I'm interested to know whether paying for the wedding is just spending or considered a gift.

Surely paying for a wedding is just like throwing a party, so not a gift?

Pay the suppliers direct and then it's spending isn't it?
A gift would be £5k direct to the adult child to spend as they wish.

Yes, as you've pointed out correctly you're talking about paying for goods rather than cash gifts.

This wouldn't be taken into account for IHT. It's just the same as buying a holiday or computer for them. The wedding wouldn't make up part of your estate.

That's what I'd think, yes, but then there are lots of similar things. E.g could I send DC on holiday every year and that not be a gift?

FWIW, I'm not looking to avoid this tax, just interested in what counts/doesn't count.

So I can give any gift. As long as it's not cash? A house, a car? That doesn't feel right?

A house would come into IHT if you didn't survive 7 years after. You can indeed buy a house and attract zero IHT if you survive over 7 years after making the gift.

People buy their kids cars all the time!

It's your money, you've earned it and already paid tax on it. Makes more sense to be generous in life if you have the money than let the tax man take 40% after you die.

www.gov.uk/inheritance-tax/gifts#:~:text=If%20you%20give%20something%20away,for%20free%20for%20your%20holidays

Inheritance tax will only be payable if you die within 7 years of gifting it.
We are gifting a lot to our DC now when they need it most. Hopefully we will live longer than 7 years, but if not, there should still be money left in the estate which will go to them and cover the IT

Yes, I realise that but my parents are well into their 80s and considering some significant gifts.

Personally, I'm not that worried, provided the cash is actually available to pay the tax when it becomes due, I think if there's that much money, it should be taxed, but Dad is putting a lot of energy into this.

Ah sorry I thought it was you.

If they're elderly then as well as IHT being a concern the other thing to consider is deprivation of assets. DOA is not limited to 7 years, a local authority can go back further if they think someone is offloading cash to avoid paying for care.

Also just seen it's your parents and not you. They should really seek professional
advice and be very careful re deprivation of assets.

Ah cross posted with Sam!

I wish Dad would stop worrying about it. There's plenty of cash and sadly, the cost of a wedding will only cover a few weeks' care anyway.

I would say that if they have the money to spare then a gift of £2,500 to a grandchild getting married would be both kind and sensible at that age.

And if they wanted to use the annual IHT-exempt gift allowance to various relatives then that would also be a perfectly reasonable thing to do as long as they're not likely to be relying on local authority care funds. Their choice.

I wouldn't have thought paying for a wedding would be considered depravation of assets? Surely paying for a party is like paying for a service. It is for the DGPs benefit too as they want to throw a big party for DGC and quite frankly they should be allowed to spend their money as they wish. Not the same as buying and gifting items like houses and cars. But assuming they have their health, why should they even have to consider depravation of assets, it feels massively ageist.

Same as buying holidays, if the DGPs get to go along I wouldn't see that as deprivation of assets but perhaps buying a holiday for someone would be?

Either which way they are clear for the £2.5k but I suppose a solicitor would need to be consulted about whether paying for a wedding would be considered deprivation of assets. As others have said though if they've got so much to leave that this is a consideration maybe it'll be fine if a little bit extra tax has to come off the estate so don't worry too much. 😅

My own response re DOA wasn't about the wedding, it was based on OP's later replies
re "significant gifts", houses etc - just in case my advice was unclear.

I'd agree that if they are over the IHT limit paying for weddings, holidays etc are a great use of the money too.

I was caught up in the gift of a car analogy.

Late M&D were no-longer driving so gifted me their car (value £40k+).
Ddad then unexpectedly died a few weeks later.
Solicitor said that the gift would have been liable for tax if it had not been that his will specifically stated I was to receive said car (the remainder of the estate passed directly to my Dmum).