PIL want to give us an early inheritance. How does this work with Tax etc? I'm a bit dense.

[ConfusedbyMoney]

PIL want to give us 100,000! Which is incredible and fantastic and would help us so much. I'm currently out of work (made redundant while pregnant) and DH is earning just enough to pay the mortgage and have us break even at the end of the month.

We don't have a big house and this money could pay off the mortgage, meaning we could save that money at the end of every month rather than scrabble around to cover bills etc.

As I understand it they can give this to us as a gift and as long as they live for 7 years (I think) afterwards then there is no inheritance tax to pay? Is that right?

We are in receipt of Tax Credits, would this affect them? Who do we declare it to?

As you can tell I am quite clueless.

IS there something better we could do with the money? Our mortgage is currently at 5% but will change next year. I doubt we could get such a good savings' rate in the current climate.

Any advice will be more than welcome! TIA

I don't know about tax credits but when my dad gave us 20k a few years ago he was told that if he lived for 7 yrs more we wouldn't be liable to CGT.

I'd try the tax credits website for advice about that.

Personally I would always pay off the mortgage if I could. Just for the sense of security it would give.

That's my feeling, Orm, it would mean we would no longer be paying interest on it and that we could actually save (sorry, that seems like such a luxury right now!)

I'll have a look at the site now.

Tax credits site is telling me nothing!

I wanted to clarify also that by "savings" I mean money that can be put towards unexpected extras like the car MOT and Christmas presents (we're not talking about much here). I don't want anyone to think I'm being moneygrabbing and if TCs go because of this, then we will be back to square one, but still be owning our own home (which is a luxury in itself). Oh dear, I'm jabbering now.

Would this money be included as Income or is it a separate thing, does anyone know?

Can't help WRT Tax Credits, but I agree with OrmIrian about paying off the mortgage. That would give real peace of mind.

My father has given us some money too( not as much as £100k though) and we put it straight to our mortgage which is now more or less paid.
It does feel good not having such a huge burden every month.
Would definitately recommend putting as much as poss into your mortgage.
What a position you find yourself in!

I have a feeling that tax credits ask about savings over £6000 and take into account any income earned from them, think you need to give them a call though.

How very lucky you are!

Surely you would only need to inform them if you are going to have savings left over, not sure hopefully someonelse will know better

I would definitely pay off my mortgage with any inheritance I was given, as your mortgage payments will then become your extra money iyswim,
If I had enough left over I would also book a family holiday, nothing expensive just a week in the sun

ConfusedbyMoney - no doubt at all. pay off the mortgage as long as you do not sufffer early repayment penatly.

As long as PIL lives 7 years there is no inheritance tax to pay.

The only word of caution I would add is if FIL is doing this to avoid paying care home costs 'by reducng his wealth' then there may be a risk of claw back depending on how long it is between the gift and the time he has tt move to a care home.

Diferent LHA/councils have different rules but others wil know much more I am sure.

I was going to say the same thing about avoiding care home costs.

I will call TC and find out how this will affect us. Thank you so much for all the replies. I was worried I was missing some important factor that could be a problem.

No worries about care home costs for the next 10 years I would think; and I don't believe they'd be eligible for help even after they've done this for us.

We really are very lucky. No complaints coming from this quarter about PILs!

Thank you again for all the replies.

This is something I have been meaning to look into - is there anywhere you can look for info as to how/how much councils can take/claw back for care homes. It is an important point as in many cases any money given will already have been spent by receivers. Does anyone know where to get info on this? Thank you

Receiving a capital sum will only affect your tax credits if you invest it and therefore have income from it. if you use it to pay off your mortgage then your TCs will not be affected. Worth informing them though.