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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15916
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I will be receiving a large amount of inheritance money soon,

Resolved Question:

I will be receiving a large amount of inheritance money soon, I'm a pensioner and my husband is on credit pension, I want to gift all the money to my daughter, is that possible and what are the affects on me doing that. .?
Submitted: 3 years ago.
Category: Tax
Expert:  TonyTax replied 3 years ago.
Hi.

Can you tell me how much money you will be inheriting. What was your relationship to the person who has left the money to you? When did they pass away?
Customer: replied 3 years ago.
£250'000, my mother and father died within 2 months of each other. Me and my two sisters will each be receiving the same amount.
Expert:  TonyTax replied 3 years ago.
Thanks.

Leave this with me while I draft my answer. There is a fair amount to consider so it will take a while.
Customer: replied 3 years ago.
Ok thank you
Expert:  TonyTax replied 3 years ago.
Hi again.

If you give away £250,000 to your daughter, you will have made a "potentially exempt transfer" to her. What that means is that so long as you live for seven years after making the gift, it will not be included in the valuation of your estate for Inheritance Tax purposes when you die. If you die within seven years of making the gift, its value will be included in your estate for IHT purposes.

The first £325,000 of your estate will be exempt from IHT when you die and if that estate includes gifts made in the seven years before you die, the £325,000 exemption will be used first against those gifts in chronological order. Take a look here for information on Inheritance Tax and here for information on who pays it. In particular you should read the section headed "When a beneficiary or a 'donee' has to pay Inheritance Tax". You might also read about transfering a nil-rate Inheritance Tax band here.

If the passing of your parents was within the last two years, you might consider a Deed of Family Arrangement" whereby you can renounce your inheritance in favour of your daughter. This would avoid any potential IHT liability for your estate on the £250,000 you would otherwise receive. You should discuss that with the solicitor dealing with the estates to make sure that such an arrangement would not cause other problems tax wise for the estates of your late parents. You can read about Deeds of Family Arrangement here and here.

You might consider contacting the people here to make sure that your inheritance will not affect your husband's pension credit entitlement. It won't affect your state pension.

I hope this helps but let me know if you have any further questions.
Customer: replied 3 years ago.
So are you saying the best thing to do is to speak with my solicitor who is dealing with this sale, we are close to completion date and I have to prepare. Does my daughter have to declare the money she receives, she will also be helping me and my husband in the future. As she already does now.
Expert:  TonyTax replied 3 years ago.
You should at least discuss the possibility of a deed of family arrangment with the solicitor.

Your daughter does not need to declare the gift but if she puts it on deposit and earns interest the interest will be taxable income. If the tax office ask where the money came from, there will be no problem in telling them.

If you are to make the gift, you might write a letter to your daughter so she can prove where the money came from. If the money reaches your daughter via a deed of family arrangement the solicitor will write to her in any event. Your daughter should inform her bank in advance of any large deposit direct into her account as their money laundering rules could delay access to it.
Customer: replied 3 years ago.
It will all be ok for her to buy a property with it.
Expert:  TonyTax replied 3 years ago.
She can do what she wants with it.

There are so many parents helping their children get on to the property ladder right now and if those gifts for property deposits or outright property purchases were taxed, we'd have irate parents on the streets and MPs under siege.
TonyTax and other Tax Specialists are ready to help you
Customer: replied 3 years ago.
Hi can I still ask questions?
Expert:  TonyTax replied 3 years ago.
You can ask follow up questions on the same topic.
Customer: replied 3 years ago.
Hi I just want to know if I will have to pay capital gains tax against money I inherited and passed on to my daughter , also done deed of variation through the solicitor at the time of completion, I'm just worried about having to pay out tax and I'm receiving state pension, my husband is receiving credit pension for another year until he gets his state pension?
Expert:  TonyTax replied 3 years ago.
There is no CGT on a cash gift, just the possibility of Inheritance Tax if you die within seven years of making the gift. That possibility can/will be bypassed if you execute or have executed a Deed of Family Arrangement as I mentioned earlier in this dialogue.

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