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bigduckontax
bigduckontax, Accountant
Category: Tax
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My Aunt aged 92 is in a care home and wishes to gift some money

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My Aunt aged 92 is in a care home and wishes to gift some money to myself and my sister. She has plenty of money to cover the care home costs. Both my sister and I are beneficiaries in her will. What would the tax situation for us be please?
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. The UK has no gifts tax regime so the are no tax consequences in this proposal. Just thank your lucky stars you don't live in France where Gifts Tax kicks in at 5K Euros! However, as Benjamin Franklin once sagely observed that in life there are but two certainties, death and taxes. There remains one tax trap. Substantial gifts create a Potentially Exempt Transfer (PET) in your Aunt's Inheritance Tax (IHT) affairs. PETs run off at a taper over seven years and in the event of the donor's demise within that period are added back to her estate for IHT purposes. PETs are the first to suffer IHT and if her estate on death is insufficient to meet the tax on the PET then the liability cascades down to the beneficiaries for immediate settlement. IHT does not, of course, kick in until 325K and then is at 40% on the surplus. Your aunt can also inherit any unused 325K of her husband's making a theoretical 650K tax free available. The 325K is inflated by any inter spousal or charitable bequests. The classic defence against tax on a PET is, of course, a reducing term life insurance policy, but I appreciate that age may make premiums prohibitive. As far as inheritance through her will is concerned you would receive any bequests tax free as IHT, if any, would be be settled by the executors or administrators of her estate before distribution. I do hope that you have found my reply useful.
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Customer: replied 1 year ago.
My sister and i are executors of my Aunts Will and she has never been married. Her estate and the moment would total about £350,000 so we would have to pay the excess at 40% is that correct?
Expert:  bigduckontax replied 1 year ago.
Yes 40% on 25K, 10K if she drops dead at this moment. Don't forget that charitable bequests inflate the 325K limit. Thank you for your support.