Inheritance tax on gifts

It depends.

The joint account can be presumed to be half yours half hers, and so it could be reckoned that you and she each gave £50k to the children.

It really depends on what your wife's intention was at the time of making the first transfer. It could be that she wanted to make the £100k gift to the children from her own money, but did not have a cheque account in her own name, and so used the joint account as a mere staging post. I doubt whether the fact that your signature is on the cheques would necessarily change that, i.e. you could simply have been helping her with the admin, though questions could be asked as to why she didn't.

But she could have intended to give £50k of her own money and expected you to match it with £50k of your own money, and given or lent you £50k to enable you to do so. Or indeed the whole £100k could have been a loan or gift from her to you, with you then making the whole gift to the children.

In the absence of documentary evidence of what the intentions were at the time, they could be taken to be whatever she later claims them to have been.

It depends. Do you mean if she had written the cheques from the joint account? That might have the effect of eliminating some doubt, but it still wouldn't be definite. The fact that it's a joint account means you *are* involved, the only question is in which capacity.

If she happened also to have a cheque account in her sole name, and used that, it would be pretty definite that it was her gift and not yours, so there ought to be no question of it being counted as part of your estate.

Thank you for the helpful reply. As it happens she does have a cheque account in her sole name, so should the situation arise it would be as well to bear that in mind.

Don't forget that IHT is not an issue if your estate passes to your wife....

It can be very much an issue if the estate passes to the wife first and then (as part of her estate) to other heirs, as opposed to passing directly to those heirs bypassing the wife.

Yes, of course - I meant IHT wouldn't be payable purely upon the death of the OP.

Out of interest (and I know this is your area, RR, not mine) how would the £100k PET be treated for IHT if the wife dies, say, 4 years after the husband - assuming the husband's gift to the kids (or at least half of it) is deemed as his, not her, gift? (If that sounds like I'm asking the same qu. as the OP, apologies, but I don't think it'squite the same).

There hasn't been a £100k PET. There have been two independent 50k PETs to the children, one from him and one from her. His will be taxed as part of his estate (as a 1 year old gift) and hers as part of hers (as a

5 year old gift).

If I've misunderstood what you meant, please explain a bit more.

If there had been a 50k loan from her to him, then of course his estate would be neutral, since although his 50k gift would be added to his estate, his 50k debt to his wife would be subtracted from it.

In due course the result would be that when she dies, the 50k she got back off his estate (if she hasn't meanwhile spent it), and the

50k she gave to the kids would both be taxed as part of her estate.

I reckon I've lost the plot - doubtless delirium after just beating the filing deadlines... :-(

I guess what flashed through the one remaining brain cell was that - if xfers (gifts) between spouses are outwith IHT considerations - could a gift from one (to a 3rd party) ever be taken into account when (subsequently) computing IHT liability for the (deceased) other.

To which your answer is (I assume) - "no, because all PETs are deemed to be specifically from one or the other (or possible both 50:50); and one person's PET can never transfer to become the spouse's PET."

Think I'll stick to IT, CT, CGT, VAT .... all much simpler.... :-) .... but would be glad to know whether the above is indeed your answer....

In message , Martin writes

...until she dies when her beneficiaries will have wished that you had taken steps to use your own threshold for IHT.

Something like that.

I guess things can get muddled up in the case of joint accounts if one spouse accidentally instigates a PET on behalf of the other without the other's explicit consent or even knowledge. Basically inter-spouse transfers are never "potentially exempt", they are always absolutely exempt.

Personally, I find the term "potentially exempt transfer" a bit opaque and it would be easier to understand if it were called "potentially taxable". The answer to your question may reveal itself to you more easily if you think of it that way, even if the taxman likes to think of every transfer as in principle taxable unless there is a specific exemption (such as it being between spouses, or outside the 7-year horizon). A GWR, for instance, is not a PET, it is a non-exempt transfer.

So my answer is: No, because every transfer has a unique identifiable donor and a unique identifiable recipient, and so any gift from joint donors (not necessarily 50:50) is for tax purposes deemed to be two transfers (or more if the joint donors number more than two). In the case of two parents jointly giving £100k to their 5 children we are actually looking at ten PETs. Moreover, it may be necessary to impose a chronological order upon them in order to ascertain which, if any, of them will be directly taxable.

What I mean is that if a person has already given away (in the 7 years prior to death) 20k short of the NRB, and then makes five more 10k gifts, then the first two of them will still be in the NRB, and so the other three will in principle be taxable directly, whereas the first two will be taxed as part of the residual estate.

How would this order be determined, if instead of handing over the five cheques one at a time to the children, he throws all five on the coffee table at an informal ceremony, or hides them under the dinner plates before everyone comes in? Order in which they are banked? Order of cheque serial numbers?