I am in the process of buying a house as my main residence with my mother putting up 1/3 and father the other 1/3. They want to make the contribution as a gift so that if they die after 7 years they won't have to pay any tax on their contribution via inheritance tax. Should we see a financial adviser or solicitor so as to make it clear how much much has been contributed and that it is a gift?
Thanks for your advise.
My father did something very similar for me. He wrote me a latter saying the money was a gift. He paid the money to be and I then bought the house using it. He died more than 7 years afterwards and the gift was not taxed, indeed it was not even mentioned on the inheritence tax forms so there was no need to produce the letter.
It is important to clarify that the gift is a gift and not a loan of course.
Robert
Definitely yes. Of the two, I'd probably see a solicitor. They may charge you what seems like a lot of money, but it's going to be an awful lot less than the cost of getting this sort of thing wrong.
Adam
I really can't see why, as Robert demonstrated. As long as the contributors do not gain direct or indirect benefit, then it's a straightforward matter. They might need to seek advice on IHT generally if each estate is more than the IHT threshold of ~£288,000.
Daytona
In message , Jason Hallway writes
If the gifts are less than £285k then it isnt worth it. The evidence of the cheque going into the bank is probably enough. A letter saying 'Dear Offspring, please accept this gift of £XXX Love Mum.' would make it rock solid.
Be aware that it is unlikely that any IHT will be payable on the gifts if the donors die, it is just that the gifts use up the 'nil rate band' first thereby bringing more of your parents residual estate into the tax band.
If the donors are married they should seek IHT advice if the TOTAL estate exceeds the limit (£285k).
It could be, if their whole estate (including the gifts) is more than the NRB.
Don't confuse the potential liability for IHT with the possibility of having the whole lot clawed back if it ends up being claimed that it was a loan. Not much chance of that, though, I should think. In the absence of evidence of a loan agreement, it would generally be assumed that it was a gift.
If the whole estate is more than the NRB, it amounts to the same thing, assuming the donees and to-be heirs are one and the same persons [excuse the grammar].
Another related topic is that if the parents eventually need to be cared for at the state's expense then it might be claimed that the gifts were made in order to avoid paying for care can be clawed back. i don't know much about this but others will doubtless advise.
Robert
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