Inheritance and ESA/Tax Credits

calcotti

chiarieds said: You can gift much more than £3k if you don't think it will be more than the Inheritance Tax Threshold in such an instance.

Absolutely. A gift over £3000/annum is potentially exempt depending on the length of time since it was made but even if not exempt that simply means it is counted towards the estate. Whether or not any IT will then be due depends on the total size of the estate. The tax free amount will be the IT allowance for the deceased plus possibly all or some of the IT allowance from a predeceased spouse/civil partner plus possibly a property allowance.

As per my reply on 4th May I can't see how a deed of variation helps in this case. If OP finds takes advice and finds that it does I'd be interested in that advice.

Sue_Alumni

Hi

I did mention the source as CPAG. I did refer to the previous edition of CPAG but the same information can be found in the 2022/23 edition.  

See Welfare Benefits & Tax Credits Handbook 2022/23 Chapter 22 Capital rules under pension age part 5 Notional capital - Capital payments made to a third party on your behalf

I must admit that I do not know much about IHT or CGT but surely, and based on what we know, if there has been no deed of variation the question of IHT is only relevant when mum dies when I agree the payment to the daughter could attract some IHT (assessed on a tapering scale) if Mum does not survive 7 years from the date of the gift. As I understand it, and I am happy to be corrected on this, someone can make annual gifts of up to £3000 pa before they are  viewed as potentially exempt transfers.   It is always prudent to log the date, amount and the purpose of gifts and the purpose for which they are made. It may be that the OP and mum may want to consider getting some legal advice about perhaps updating their wills and tax implications on what they are planning to do. 

chiarieds

Perhaps I have not been clear with the personal example I gave. I wished to see my children enjoy the benefit of (most of) what would be their inheritance, much like the OP mentioning her Mum may make her a gift during Mum's lifetime. Likewise I wanted to ensure that any future Inheritance tax would not be a burden to my children.

My solicitor advised that as my future estate would be below the inheritance tax threshold, i.e. what I intended to give + my current home, then inheritance tax would not apply, nor the 7 year survival 'rule,' & I could gift my children equal shares in a property I was selling when the sale came through. This was considerably more than £3k last year.

So, the potential estate of the person intending making a gift should be considered, & a solicitor's advice may indeed be helpful.

calcotti

chiarieds said:

Perhaps I have not been clear with the personal example I gave. 

It was clear to me.
Your key message was also clear - that before overthinking it the first thing to look at is whether any IHT is likely to be payable at the the date of future death. If not then there is no need to do clever IHT planning.