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Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.
You are correct in your opinion as to taxation. A gift of this magnitude will create 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 the donor's decease within that period are added back to their estate for IHT purposes. PETs are the first to suffer IHT and if the estate is inadequate to pay the tax on the gift then the liability cascades down to the beneficiary for immediate settlement. IHT does not, of course, kick in until 325K. The classic defence against IHT on a PET is a reducing term life insurance policy.
I do hope that I have been able to set your mind at rest on this matter.
Not quite; there might be a liability if the donor's UK estate is over 325K on death and subject to IHT and insufficient to meet the IHT on the PET. Only then you would become liable for this taxation.
IHT is levied at a flat rate of 45% on estates over 325K.
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If the donor outlives the 7 year rule the PET dies.
Thank you for your support.