Interesting Inheritance Tax Question

Once the gifts exceeded the IHT threshold they started tapering away:

0 - 3 years - No relief 3 - 4 years - 20% 4 - 5 years - 40% 5 - 6 years - 60% 6 - 7 years - 80%

...so things may not be as bad as you think. Also there is £6k gift allowance available. Nobody can force you to inherit a debt!

Well, it's the tax that starts tapering not the gifts themselves. Furthermore, they (Capital Taxes) take the oldest gifts off the nil band first - thus minimising the benefit of the taper.

But, utimately, if the remaning estate is too small to pay the tax don't the executors have to start contacting the recipients of the gifts and asking for the tax?

Robert

That's not strictly true, is it? Generally it's the value in excess of the NRB which tapers, and the 40% tax rate is applied to the tapered down amount.

Unfortunately the OP did not specify when within the 7 years the million pound gift was made, and indeed hints that it might have been made in dribs and drabs.

Best case is that it was made between 6 and 7 years prior to death, which would mean:

£1000k less £263k NRB equals £737k taxable element of gift, tapered down by 80% to £147k4, resulting in a tax bill in respect of the gift of just under £59k, plus £160k in respect of the residual £400k still in the estate. That still leaves enough in the estate to pay all the tax due and then some.

Yes, in cases like this where tax is in fact due on the gifts because they fall outside the NRB. But you can't get money out of a conman who's already spent it all, and I don't know to what lengths CTO would go in terms of bankrupting him.

If indeed the deceased was conned out of these "gifts", one could call into question the bona fide nature of these gifts. With luck, if the deceased can be painted as a victim of fraud here, then it might be possible to disregard them for estate purposes, and consider the £1000k as spent rather than given, leaving the entire estate worth only £400k instead of £1400k.

Nice one Ronald! It is also in the nature of people who prey on the elderly that rather than demanding £1m in one noticeable hit they are more likely to take it in dribs and drabs. That will make it difficult to trace and when traced some of it will - if it *must* be a gift - get IHT exemption as "Regular Gifts Out of Income".

Thanks. The 1m was indeed paid in dribs and drabs - a lot of it being in cash payments (if not all). Not sure when though. There was a court case (not sure what the crime was - some sort of deception I suppose) but the case collapsed when the deceased gave evidence stating that she willingly gave the money. The police thought otherwise - as did relatives. So dont know what the legal status is at current

Thank for the link - looks like quite a complicated project to sort it all out...

The cash must have come from somewhere, she must have withdrawn it from a bank or sold shares or something. There will be records and an accountant won't have any trouble going though those records and making sense of what happened.

Ugh!

Not really but it will take time and the executors will need to be hard-nosed, used to dealing with the Revenue. For such a large sum of money it would be foolish not to invest in a good solicitor or accountant.