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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15950
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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My wifes mother is thinking of selling her house and dividing

Resolved Question:

My wife's mother is thinking of selling her house and dividing the proceeds 3 ways between her 3 children, as an advance against what they would each eventually inherit. The sums involved would only be about £30k per child.

Would each of the children be subject to inheritance tax on this....either if it were done now or when she died?

Secondly, if she loaned each child the money now - rather than gifted it as an advance on their inheritance - then there would not be any tax now....and the loan would be repaid as a contra on their inheritance on her death? Any tax then?
Submitted: 3 years ago.
Category: Tax
Expert:  TonyTax replied 3 years ago.

Hi.

Can you tell me where your mother in law intends to live after she sells her home please.

Customer: replied 3 years ago.

She lives in Abergavenny, Monmouthshire, South Wales now and will continue to do so.

Expert:  TonyTax replied 3 years ago.
Thanks.

If your mother in law makes gifts of £30,000 to each of her three children, these will be potentially exempt transfers which will fall out of her estate so long as she lives for at least seven years after making them. If she passed away before the seven year threshold, then they would be included in her estate for Inheritance Tax purposes. The nil rate IHT band will be used first against gifts made in the seven years before death so if the total value of the gifts made in the seven years before death was less than the nil-rate band, there would be no IHT liability on the gifts.

If the money was loaned to the children, then there would be no immediate IHT liability. The loans would be assets of the estate so their value would be included in your mother in law's estate.

Take a look here for information on who can be liable for IHT, here for information on the transfer of a nil-rate band and here for information on taper relief.

I hope this helps but let me know if you have any further questions.
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Expert:  TonyTax replied 3 years ago.
Thanks for accepting my answer.