Inheritance and gifts...

[pipp]

I think i understand this but just want clarity as to my personal situation.

Mum and Dad were married, Mum has just died (in June) and Dad has just had all her tax-free pensions etc pay out and he now has around £600k in the bank.

He wants to give his three children a cash lump sum as a gift.

Questions:

1. Do my Mum and Dad's £325k IHT allowances get added together now to make £650k ?
2. If my Dad were to die right now, would his estate pay IHT ?
3. If my Dad were to give me say, £100k, there would be no tax to pay unless he died within the next 7 years AND had an estate worth more than £650k ?
4. If he did die within the next 7 years, AND his estate had grown to a taxable amount, the £100k would then have the £3k allowance deducted, and then be liable for IHT on £97k, regardless of whether the beneficiary had spent the amount in the mean time ?

It's basically the £3k tax-free gift stuff that's confusing me. In one sentence it's said you can give an amount and if the giver is still alive after 7 years there is no tax, and in the next says that any amount over £3k is liable for the tax. And if his estate never grows to a size taxable under IHT then there would never be any tax to pay on any amount ?



Many thanks in advance.

[maths]

1. Do my Mum and Dad's £325k IHT allowances get added together now to make £650k ?

If mother left all her estate to father then none of her nil rate band (NRB) was used. In which case on father's death he would effectively have a 650k NRB.

2. If my Dad were to die right now, would his estate pay IHT ?

If all he has is 600k then no IHT. HOwever, doe she not own a house? In which case there would be IHT.

3. If my Dad were to give me say, £100k, there would be no tax to pay unless he died within the next 7 years AND had an estate worth more than £650k ?

No, not quite. Assuming father has not made any earlier material gifts if he died within 7 years of the gift there would be no IHT on the gift. The gift would, however, eat into father's NRB avaiable for offset against his estate on death.

4. If he did die within the next 7 years, AND his estate had grown to a taxable amount, the £100k would then have the £3k allowance deducted, and then be liable for IHT on £97k, regardless of whether the beneficiary had spent the amount in the mean time ?

No; see answer above.