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If I accept a cash gift from a widowed parent sum of £30,000

Resolved Question:

If I accept a cash gift from a widowed parent for the sum of £30,000 to pay off a loan what happens if they die inside 7 years?
I know it should be added back to their estate valuation but am I then due to pay tax on the sum I have been given?
Regards
Submitted: 8 months ago.
Category: Tax
Expert:  bigduckontax replied 8 months ago.

Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.

The gift to you of 30K creates a Potentially Exempt Transfer (PET) in the Inheritance Tax (IHT) affairs of the donor. PETs run off at a taper over seven years and in the event of a demise within this time frame are added back to the estate for IHT. PETs are the first to suffer IHT and if the deceased's estate is insufficient to meet the IHT on the PET the liability cascades down to the beneficiary for immediate payment. The classic defence against this is a reducing term life insurance, but age may make the premiums prohibitive.

IHT kicks in at 325K and is at a flat rate of 40% unless the estate is over 10% charitably disposed in which case the rate falls to 36%. The 325K is increased by any charitable or inter spousal bequests. A widowed person can also benefit from any of their deceased partner's unused 325K exemption level making a total tax free sum of 650K a possibility.

I do hope that you have found my reply of assistance.

Customer: replied 8 months ago.
Thanks for that - the Estate would not reach the limit for tax - assets & income will not accrue to such a figure. That being the case would there be no tax to pay on either party's behalf?
Expert:  bigduckontax replied 8 months ago.

Correct, unless of course they donor wins the Pools of the million quid jackpot prize on the Premiums Bonds on the day before they die! Then, of course, there will be cash swilling around their estate anyway.

Please be so kind as to rate me before you leave the Just Answer site.

bigduckontax, Accountant
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Customer: replied 8 months ago.
Ok thanks for your help, we will worry about that should it happen
Expert:  bigduckontax replied 8 months ago.

Delighted to have been of assistance.

Thank you for your support.

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