My father wants to give his assets while he is still alive!

First of all would the value of his estate, prior to any gifts given in the seven years prior to his death, be greater than the Inheritance Tax threshold (IHT) - currently £263,000? If not then there is no Inheritance tax to pay.

If the estate is worth more than the IHT threshold and he sells the house giving the money to you and your brother, then if he dies within seven years, there will be IHT to pay. There's a sliding scale depending on how many years there are between the date of the gift and the date of death.

There are other exemptions, like an annual exemption for lifetime gifts of up to £3000 per donor, small gifts of £250 per donee, gifts in consideration of marriage by a parent up to £5000.

Indeed not, and since the IHT threshold has not kept pace with housing inflation, more and more people are becoming affected by this tax, which years ago was only paid by those who were seriously rich.

Rgds

__ Richard Buttrey Grappenhall, Cheshire, UK __________________________

Depends on many things, including the value of his assets- current and given away within seven years before his death. He should be okay for Inheritance tax if the total is below 263,000. Where he is likely to hit problems though is if he needs to claim any benefits, such as Housing Benefit. They may well assess him for rent as though he still had the money from the house, meaning he would potentially have to pay full rent. This may be the same if he needed any means tested care, or to move to a care home. He would be assessed as though he still had the money.

Neb

Yes, potentially. It depends on how much cash is involved and on how much else he is "worth" on top of that. Unless he lives for 7 years after gifting you the proceeds, these gifts would be treated as part of his estate for inheritance tax purposes. As you may know, the first £263k (now, likely to be inflation linked) are tax free and the rest will be taxed at 40%.

"Nebulous" wrote in news:421a4b94$0$10951$ snipped-for-privacy@news-text.dial.pipex.com:

Thank you for clearing that up for me.

He only has a modest terraced house and as such is only worth around 100k in our area, and his savings etc are less than half that amount so the IHT will not be hit,so that at least is good news!

I've phoned him to let him know what you've all said and though he's OK for paying the council rent for his OAP accomodation from his works pension, the one thing that's worried us, is the paying for any care home fees from his sale of the house.

At the moment he is not 100% but nothing at all serious, but as we both commented, what if in a year or two, his condition deteriorated to the point where he needed to go into a care home, he had sold up and shared out the proceeds of the house to me and my brother? Do we then have to pay his fees for the care home - they can be awfully expensive.

If this is the case, and we do have to pay for him, we'd really be better off not touching any of the money for 7yrs as we couldn't afford to pay the fees on our wages alone, as we aren't on great money.

thanks again for your advice...

Yes, the local authority can come after the family for the money to keep your father in care or nursing home, and they have wide-ranging powers to do so, if they have a reasonable cause to believe that your father has divested of his assets in anticipation. You need to speak to a financial expert, solicitor or Age Concern/Help the Aged for advice on the best way of doing this.

Alec

I noticed Statutory Instrument 1991 No. 1377 available from the link below.

I think that section 2 (b), quoted exactly, gives some clue as to why taxes including IHT are such a pain in the backside :-)

The Taxes (Interest Rate) (Amendment No.3) Regulations 1991 INCOME TAX INHERITANCE TAX TAXES

The Treasury, in exercise of the powers conferred on them by section 178 of the Finance Act 1989[1], hereby make the following Regulations: Citation and commencement 1. These Regulations may be cited as the Taxes (Interest Rate) (Amendment No.3) Regulations 1991 and shall come into force on 6th July

1991. Amendments to the Taxes (Interest Rate) Regulations 1989 2. In regulation 5 of the Taxes (Interest Rate) Regulations 1989[2]- (a) for "6th May 1991" there shall be substituted "6th July 1991"; (b) for "12.75 per cent. per anum" there shall be substituted "12.25 per cent. per anum".

No there isn't. The sliding scale applies to the IHT payable and there is no IHT payable on the first £263,000 of the gift. He has to live the full 7 years or the gift has to exceed the IHT threshold for any sliding scale to kick in.