Gift tax question
Discussion
Please could someone explain how gift tax works in this situation (OH not me):
Grandmother died 1 year ago. Her house was left to her 6 children. 1 of these children owned half the house already, this goes back many years (20+), he has never lived there and simply bought half of it to help her out at the time.
House is now being sold and as above the total sale amount will be split 6 ways between siblings. Will any of the recipients have to pay gift tax? What are the thresholds/rates for this and would the situation be different if a recipient was working/retired?
Thanks in advance.
Grandmother died 1 year ago. Her house was left to her 6 children. 1 of these children owned half the house already, this goes back many years (20+), he has never lived there and simply bought half of it to help her out at the time.
House is now being sold and as above the total sale amount will be split 6 ways between siblings. Will any of the recipients have to pay gift tax? What are the thresholds/rates for this and would the situation be different if a recipient was working/retired?
Thanks in advance.
No, because there's no such thing as Gift Tax.
There could be Inheritance Tax on the estate (what was the value of the estate?) and maybe the sibling who bought half the house (that's a can of worms for him and possibly for the estate - did the old lady pay him rent?) might have to pay CGT on its sale.
If the old lady gave substantial gifts before she died then they could be added back into the value of the estate, but again, it's the estate that pays that tax, not the recipient.
But for the other 5 beneficiaries, they should just get paid out their share.
(I should add that I'm just a bloke on the internet but have been looking at this as it will affect me. You should always take professional advice on all such matters).
There could be Inheritance Tax on the estate (what was the value of the estate?) and maybe the sibling who bought half the house (that's a can of worms for him and possibly for the estate - did the old lady pay him rent?) might have to pay CGT on its sale.
If the old lady gave substantial gifts before she died then they could be added back into the value of the estate, but again, it's the estate that pays that tax, not the recipient.
But for the other 5 beneficiaries, they should just get paid out their share.
(I should add that I'm just a bloke on the internet but have been looking at this as it will affect me. You should always take professional advice on all such matters).
Thanks for the help though, appreciate it.Ok....looking at the house in isolation (if she has other assets then it adds to the issue of course)
The house is half owned by her and that half of the money goes 6 ways to the kids. The other half of the house is owned by the one who bought it years ago...so thats all his.
Her IHT liability is based on her assets and that will PROBABLY include the half of the house she didnt legally own as she had full benefit of it.
Any tax that is due (40% of value over £325k*) will come off the estate before kids see anything anyway.
Interestingly....it often works out that an asset that pushes the IHT up (even though it is not owned by the deceased...ala, half the house still classed in the estate yet owned by someone else) will screw the other siblings because they have to see more IHT payed before they get their hands on anything even though what the decease ACTUALLY owned was not enough to cause an IHT issue.
The house is half owned by her and that half of the money goes 6 ways to the kids. The other half of the house is owned by the one who bought it years ago...so thats all his.
Her IHT liability is based on her assets and that will PROBABLY include the half of the house she didnt legally own as she had full benefit of it.
Any tax that is due (40% of value over £325k*) will come off the estate before kids see anything anyway.
Interestingly....it often works out that an asset that pushes the IHT up (even though it is not owned by the deceased...ala, half the house still classed in the estate yet owned by someone else) will screw the other siblings because they have to see more IHT payed before they get their hands on anything even though what the decease ACTUALLY owned was not enough to cause an IHT issue.
- whats with husband...dead i assume? Did he use his allowance or give all to her when he died...if he did then she can double up her allowance to £650k which may help?
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