Giving monetary gifts to relatives ....

[Ann]

My elderly Mum gives the family money at Christmas instead of presents as she can't go shopping. This year she wants to give her two granddaughters (my nieces) more than usual £1500 each as both are struggling financially . I have heard there is a limit per year on gifting - what is this limit please and if she gives £3000 away, does that mean she can't give any more to other members of the family? Who does she have to declare it to? In this respect, would a cheque be better for each of them or just a straight transfer into their accounts? I think the law is a bit strange on this, I have looked it up and there are lots of differing answers. She doesn't have a lot of savings ............. so inheritance tax wouldn't apply - any advice would be very welcome please. :)

[factor-fiction]

She can give what she wants but when she dies if her estate is big enough to attract Inheritance Tax the taxman may take account of gifts which exceed the annual limits and try to claim IHT on those assets.
If Inheritance Tax isn't an issue then the gifts can be of any size

[joggerjayne]

If her estate is below the Inheritance Tax limit, then she can give away whatever she wants.

When someone dies, if they have given away some exceeding £3,000 then those gifts are added back into the value of the Estate, and may become taxable.

If the Estate is under the IHT limit, then there will still be no tax, even with these gifts added back on.

So, essentially ... don't worry about them, and they don't need to be declared unless she dies, in which case any gifts over £3,000 should just be added back on to the value of the Estate. But, from what you say, will still not attract any tax.

[joggerjayne]

... (as Factor30 says)

[Ann]

Thats good to know factor thanks. I'm still puzzled though. Why do people and newspaper articles etc always say then that elderly people can't pass occasional money gifts to relatives, as it may be needed if they go into care? Surely the authorities can't demand it back? What is the level where you pay inheritance tax? Her house is only part owned probably worth £80,000.

[joggerjayne]

Isn't it £325,000 ?

[Ann]

Thanks Jayne, will pass this info on to her, it will be a relief. Many thanks :)

[joggerjayne]

//Why do people and newspaper articles etc always say then that elderly people can't pass occasional money gifts to relatives, as it may be needed if they go into care?//

(1) Because they are newspaper editors looking for a story, or

(2) Because they are financial advisors hoping that people will be scared into going to spend money getting needless advice.

[Ann]

LOL Jayne, my one and only experience with a financial advisor didn't leave me very impressed either!

[joggerjayne]

ps. You're welcome x

[LoftyLottie]

Jane is correct. It is definitely well over £300,000. And besides that you can gift up to £7000 a year without it affecting anybody's tax regardless of how much money you have. (£7,000 might have been amended - I am not up to date).

[factor-fiction]

There is such a thing as 'deliberate disposal of assets' but that is only an issue in certain cases related to care home fees or in relation to DWP claims or pension credit claims, but I don't know the rules for those, sorry.

The usual £1500 or £3000 seems a nice present to me. I don't think I've ever received more than £50!

[LoftyLottie]

Sorry Jane is right. You can gift £3,000 pa. I got mixed up with the 7 years you have to live after gifting!!

http://www.hmrc.gov.uk/inheritancetax/pass-money-property/exempt-gifts.htm

[joggerjayne]

Yes, £1,500 has to count as a decent Chrissie present.

[joggerjayne]

//Jayne is right//

So there's a first, then, LOL !

[LoftyLottie]

A decent Christmas present to me would be a fiver!! Actually, I don't make monetary gifts as such but will offer to pay for something that a close relative, namely son and wife, really want. They choose, I pay!!

[LoftyLottie]

Sorry about your name change JaYne!!

[VHG]

>>>>>Why do people and newspaper articles etc always say then that elderly people can't pass occasional money gifts to relatives.

When a person dies, if their estate is worth more than £325,000 (very easy if a house is included) then anything above £325,000 is taxed at 40%, which is Inheritance tax.

So if an estate is worth say £425,000 you may pay £40,000 in inheritance tax (40% tax on £100,000).

One way to try to avoid inheritance tax is to give your money away before you die, but of course the tax people dont like the idea of that, so they will tax any gifits given to you before that person died.

You are allowed to give away £3000 a year, but if you die in the first year the person who got the £3000 has to pay tax on it, if you die two years after giving the money away you pay a bit less tax on it, and this carries on for 7 years, a bit less tax each year, where after 7 years you pay no tax in it.

So if someone DOES give you a gift of £3000 then you should really keep some of it back in case the person dies within the first 7 years. The tax people dont ask for all the money back, but they may make you pay tax on it.

This only applies if the extate is above £325,000 which is not the case in your situation.

[joggerjayne]

Don't worry, Lottie ... I would happily lose the "y". It's a constant pain having a simple name, but still having to tell people how to spell it because your bloody parents stuck a superfluous and pointless extra letter in the middle of it.

[jno]

why not change, it, Jaiynnee? It's your name now, not your parents'.

[joggerjayne]

//The tax people dont ask for all the money back, but they may make you pay tax on it//

But the tax is primarily payable out of the residuary estate, so don't the residuary beneficiaries have to divvy up for the tax on the gift that was made to you?