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Message started by lorb on Jun 11th, 2008 at 9:28am

Post by lorb on Jun 11th, 2008 at 9:28am
I wonder if anyone can help with my query?  My partner's mother gave us some cash in August 2006 to help with the deposit on our house.  However, she died in March 2007 and I've been told that this cash may be considered as part of the estate as it was given less than 5 years before her death.  Is this the case?  If so, will we be required to pay this back to the estate?

Thank you.

Title: Re: CASH GIFT
Post by zurich_allan on Jun 11th, 2008 at 10:11am
Off the top of my head (it's a few years since I've dealt with anything like this as I don't usually deal with much in regard of IHT - inheritance tax planning), I think the term for what you are referring to is in fact seven years and not five..... although I could be wrong.

What happens is that if an individual gives a cash gift then it is still considered part of their estate until a prescribed period of time for inheritance tax purposes should that individual die shortly after the gift has been made.

The reason for the rule is to prevent say an elderly or terminally ill person from giving away a large sum of money on their deathbed to a close relative or friend to avoid liability for paying inheritance tax.

Again, I can't remember the exact figures, but the liability does go down on a decreasing scale depending on the length of time the gift was made before the subsequent death. It goes something like :

After seven years - liability = 0

Seven      =30%
six          = 40 %
five         = 50 %
four        = 60%
three       = 70%
two         = 80 %
one         = 90%

Less than one year = 100%

Again, the figures may be a few percent out or something, but this is the general rule.

Now for the good news amongst all of that...

Inheritance tax is only required to be paid if the total value of the deceased persons estate exceeds circa 300k. The gift given to you WOULD form part of the estate for calculating the total value of the deceased's assets, but you wouldn't literally have to give it back unless the value goes over the threshold for paying inheritance tax.

Does this make sense to you? Post again if you have any further questions.

Title: Re: CASH GIFT
Post by lorb on Jun 11th, 2008 at 10:18am
Thanks for your response.  The entire estate totalled about 35k (I think) so we should hopefully be ok.

Title: Re: CASH GIFT
Post by zurich_allan on Jun 11th, 2008 at 10:22am
No problem. If the estate is around that figure then in terms of value you really have nothing to worry about, and you wouldn't have to give any of the gift money back.

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