Gifting large sums to family...
Discussion
Hypothetically speaking:
If I wanted to give my father a large sum of money, that was fully legal, taxed etc. Enough that he'd never have to work again. What would the tax implications be for him? Let's use £2million as an example.
So, I BT him £2million that I've already paid every due tax on, it's a genuine gift, not worked for, not owed, just a son handing his father retirement on a plate.
How does it work for him in HRMC terms?
One for Eric perhaps?
If I wanted to give my father a large sum of money, that was fully legal, taxed etc. Enough that he'd never have to work again. What would the tax implications be for him? Let's use £2million as an example.
So, I BT him £2million that I've already paid every due tax on, it's a genuine gift, not worked for, not owed, just a son handing his father retirement on a plate.
How does it work for him in HRMC terms?
One for Eric perhaps?
Life insurance written in trust to cover the cost of inheritance tax would be one way of mitigating the risk of you carking it within 7 years - but basically you'd need specific advice on a specific set of circumstances. There are all sorts of things to consider but you may as well start here: http://www.moneysavingexpert.com/family/inheritanc....
davidsp80 said:
illmonkey said:
What problems would there be if he had access to an account in your name with the £2mil in it? He just buys stuff/sets up DD's as he pleases. Still your money, he's just spending it!
This must be the best wayIf you are allowing him access to what is initially your money, the moment he spends it it becomes a gift to him.
Eric Mc said:
davidsp80 said:
illmonkey said:
What problems would there be if he had access to an account in your name with the £2mil in it? He just buys stuff/sets up DD's as he pleases. Still your money, he's just spending it!
This must be the best wayIf you are allowing him access to what is initially your money, the moment he spends it it becomes a gift to him.
It'll also be a massive job to track every transaction down to who spend it out of the account.
illmonkey said:
What problems would there be if he had access to an account in your name with the £2mil in it? He just buys stuff/sets up DD's as he pleases. Still your money, he's just spending it!
This is the answer. Account in your name, he takes money when he wants to spend as he wants. If he dies early, what's left is yours. Problem comes if you die early. How does he get the money that's left that you wanted him to have? How about a joint account?TwigtheWonderkid said:
illmonkey said:
What problems would there be if he had access to an account in your name with the £2mil in it? He just buys stuff/sets up DD's as he pleases. Still your money, he's just spending it!
This is the answer. Account in your name, he takes money when he wants to spend as he wants. If he dies early, what's left is yours. Problem comes if you die early. How does he get the money that's left that you wanted him to have? How about a joint account?illmonkey said:
Eric Mc said:
davidsp80 said:
illmonkey said:
What problems would there be if he had access to an account in your name with the £2mil in it? He just buys stuff/sets up DD's as he pleases. Still your money, he's just spending it!
This must be the best wayIf you are allowing him access to what is initially your money, the moment he spends it it becomes a gift to him.
It'll also be a massive job to track every transaction down to who spend it out of the account.
As you say, keeping track of the expenditure would be a nightmare and something the "giftor" would have to do in orde to monitor totals for IHT purposes.
Eric Mc said:
Ah - the old, "if we don't tell them they won't know" approach - usually referred to as "fraud".
As you say, keeping track of the expenditure would be a nightmare and something the "giftor" would have to do in orde to monitor totals for IHT purposes.
So is this not allowed? Joint account?As you say, keeping track of the expenditure would be a nightmare and something the "giftor" would have to do in orde to monitor totals for IHT purposes.
What's the best way then?
davidsp80 said:
Eric Mc said:
Ah - the old, "if we don't tell them they won't know" approach - usually referred to as "fraud".
As you say, keeping track of the expenditure would be a nightmare and something the "giftor" would have to do in orde to monitor totals for IHT purposes.
So is this not allowed? Joint account?As you say, keeping track of the expenditure would be a nightmare and something the "giftor" would have to do in orde to monitor totals for IHT purposes.
What's the best way then?
But a "Gift" is a "Gift" - mo matter what mechanism is used to enable the recipient of the gift access to that gift.
Look on it this way. You have a cardboard box with £10,000 in it.
You could simply hand the box to a person and say here is £10,000 for you to keep.
You could alternatively leave the box in handy loaction and allow the recipient to take the cash out of the box piecemeal.
You are still gifting £10,000 and the rules regarding the gift are exactly the same.
The only way to avoid IHT is to go about it properly using trusts ec.
However, don't forget that IHT thresholds are pretty high.
Eric Mc said:
However, don't forget that IHT thresholds are pretty high.
This is a good point.If the OP's Dad could keep expenditure in the "threshold/7" range per annum then there would never be any IHT, right?
Right now that's £325k - so nearly £50k a year, which is close to a £70k gross income.
Most of the country would KILL to have that kind of retirement!
The other important one to consider would be that trick with buying him a place to live and letting him live there for a good deal while the OP maintains ownership.
So rather than giving him loads of cash to spend on rent/mortgage, you just significantly lower that cost for him.
(Plus give him the above allowance...)
But as Eric says for this kind of amount you need professional advice, not the idle speculation of internet goons.
walm said:
The other important one to consider would be that trick with buying him a place to live and letting him live there for a good deal while the OP maintains ownership.
Depending on how you structure this, it could either be a gift, a gift with reservation, or end up being part of your estate because it doesn't effectively pass to the intended beneficiary.A friend of mine has a wealthy father. He's not only bought him a couple of houses (plus his resident home) but also 'gifts' him £1000 a month pocket money.
This friend of mine is doing very well already, and certainly doesn't need the extra money, but I believe monthly gifts are exempt, as long as they don't impact your capital. Although i'm not certain to be honest, not something I get involved in.
This friend of mine is doing very well already, and certainly doesn't need the extra money, but I believe monthly gifts are exempt, as long as they don't impact your capital. Although i'm not certain to be honest, not something I get involved in.
walm said:
But as Eric says for this kind of amount you need professional advice, not the idle speculation of internet goons.
Ditto this would need professional advice, but one hypothetical way of partially meeting the OP's hypothetical requirement would be to put the £2m into Trust with the OPs father able to benefit from all Trust income but with capital reverting to the OP on the death of the father, or being passed to the father if the OP dies first.I believe (the idle speculation of an unqualified internet goon here & not to be relied upon) that the Trust can be structured so that the father can also receive a fee from the Trust paid from the capital. Together this could provide OP's father with a six-figure income to help in retirement.
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