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ISAs and IHT

Practical Issues
Dod101
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Re: ISAs and IHT

#403082

Postby Dod101 » April 10th, 2021, 7:28 am

Lootman wrote:
Dod101 wrote:I think we are all getting a bit pedantic. As long as their is no condition attached to the gift (as in, I attach a cheque for £100,000 but it is given to you for the express purpose of buying a property) That I suspect is a gift with reservations and would not pass muster.

If on the other hand you say,'I attach a cheque for £100,000. I would prefer that you use it as a deposit for that house you mentioned but it is of course up to you what you do with it.' I think that would be fine.

The other extreme is of course to say 'As I am now getting on a bit and you are just beginning to make your way in the world, I am attaching a cheque for £100,000 to help you on your way. Please use it as you see fit' That is clearly fine.

In the case of my kids, their mortgage lender required a letter from me stating (something like) "This transfer is an unconditional gift made for the purpose of purchasing a property".

So even if there is nothing else in writing, there is likely to be that documented statement that could be looked at.

All that said, it seems the main problem arises when parents donate their own home to their kids and then keep living there. As long as it is a cash gift used to buy another property or asset, and you derive no benefit from that asset, then I would have to believe that it works as a PET under current rules.


I agree. The essence is that the donor cannot have his cake and eat it.

Dod

scrumpyjack
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Re: ISAs and IHT

#403096

Postby scrumpyjack » April 10th, 2021, 8:47 am

Dod101 wrote:
I agree. The essence is that the donor cannot have his cake and eat it.

Dod


He or she can, as long as they pay for the meal.

I know someone whose mother gave her house to her sons but continued to live in it. The sons got an agent to give a market appraisal of the rent and she then paid her sons rent so as to avoid any reservation of benefit. Her sons had some difficulty trying to get the the not too sharp agent to realise they were not looking for the highest possible rent but a more conservative figure!

PinkDalek
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Re: ISAs and IHT

#403166

Postby PinkDalek » April 10th, 2021, 1:19 pm

Dod101 wrote:I think we are all getting a bit pedantic. As long as their is no condition attached to the gift (as in, I attach a cheque for £100,000 but it is given to you for the express purpose of buying a property) That I suspect is a gift with reservations and would not pass muster.


We may be getting pedantic but I don't think that is caught by the the legislation anyway (despite what I was wittering on about yesterday).

And I agree with scrumpyjack. And I thought the wording was 'Gifts with Reservation'


The enacted legislation is indeed entitled Gifts with reservation https://www.legislation.gov.uk/ukpga/1986/41/section/102/enacted but have a look at s102(1)(b) which includes the wording:

(b) at any time in the relevant period the property is not enjoyed to the entire exclusion, or virtually to the entire exclusion, of the donor and of any benefit to him by contract or otherwise;

Thus scrumpyjack has correctly also used the phrase reservation of benefit recently in this topic.

It is also used by HMRC in their IHT Manual, such as here https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm14301 :

Dod101
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Re: ISAs and IHT

#403179

Postby Dod101 » April 10th, 2021, 2:06 pm

PinkDalek wrote:
Dod101 wrote:I think we are all getting a bit pedantic. As long as their is no condition attached to the gift (as in, I attach a cheque for £100,000 but it is given to you for the express purpose of buying a property) That I suspect is a gift with reservations and would not pass muster.


We may be getting pedantic but I don't think that is caught by the the legislation anyway (despite what I was wittering on about yesterday).

And I agree with scrumpyjack. And I thought the wording was 'Gifts with Reservation'


The enacted legislation is indeed entitled Gifts with reservation https://www.legislation.gov.uk/ukpga/1986/41/section/102/enacted but have a look at s102(1)(b) which includes the wording:

(b) at any time in the relevant period the property is not enjoyed to the entire exclusion, or virtually to the entire exclusion, of the donor and of any benefit to him by contract or otherwise;

Thus scrumpyjack has correctly also used the phrase reservation of benefit recently in this topic.

It is also used by HMRC in their IHT Manual, such as here https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm14301 :


I see, thanks. There is of course a distinction between a reservation of benefit and other reservations which might be construed as conditions which do not seem to matter. Interesting.

Dod

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Re: ISAs and IHT

#403206

Postby PinkDalek » April 10th, 2021, 3:23 pm

I think the point on cash gifts not being made conditional in any sense is such that the 7 years starts as soon as the unconditional gift is made, rather than potentially waiting for any such condition to have been satisfied. That might be what I was on about yesterday, when suggesting that any letter written at the time of the gift should be brief and to the point.

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Re: ISAs and IHT

#403209

Postby scrumpyjack » April 10th, 2021, 3:29 pm

I recall the wording that has been used in the past in my family was along the lines ' I hereby give you £XXX out of my love and affection for you'

I guess the point of that was to make clear it was an outright gift and that no consideration was involved.

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Re: ISAs and IHT

#403213

Postby PinkDalek » April 10th, 2021, 3:46 pm

scrumpyjack wrote:I recall the wording that has been used in the past in my family was along the lines ' I hereby give you £XXX out of my love and affection for you'

I guess the point of that was to make clear it was an outright gift and that no consideration was involved.


That love and affection I mentioned yesterday :) :

viewtopic.php?p=402968#p402968

scrumpyjack
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Re: ISAs and IHT

#403215

Postby scrumpyjack » April 10th, 2021, 3:56 pm

PinkDalek wrote:
scrumpyjack wrote:I recall the wording that has been used in the past in my family was along the lines ' I hereby give you £XXX out of my love and affection for you'

I guess the point of that was to make clear it was an outright gift and that no consideration was involved.


That love and affection I mentioned yesterday :) :

viewtopic.php?p=402968#p402968

Sorry missed that!

PinkDalek
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Re: ISAs and IHT

#403223

Postby PinkDalek » April 10th, 2021, 4:20 pm

scrumpyjack wrote:
PinkDalek wrote:
scrumpyjack wrote:I recall the wording that has been used in the past in my family was along the lines ' I hereby give you £XXX out of my love and affection for you'

I guess the point of that was to make clear it was an outright gift and that no consideration was involved.


That love and affection I mentioned yesterday :) :

viewtopic.php?p=402968#p402968

Sorry missed that!


No concern my end, your comment merely reinforced what I've been trying to say.


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