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Gifting Money To Children
Gifting Money To Children
We are in the process of gifting money to both of our children. Ideally we want them to use the money for property purchase.
In order to cover them from IHT further down the line, we want to be able to provide proof of gift (i.e. scanned bank statements)
Can anyone recommend a letter format/website with wording to cover gifting?
In order to cover them from IHT further down the line, we want to be able to provide proof of gift (i.e. scanned bank statements)
Can anyone recommend a letter format/website with wording to cover gifting?
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- Lemon Quarter
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Re: Gifting Money To Children
Blatter wrote:We are in the process of gifting money to both of our children. Ideally we want them to use the money for property purchase.
In order to cover them from IHT further down the line, we want to be able to provide proof of gift (i.e. scanned bank statements)
Can anyone recommend a letter format/website with wording to cover gifting?
On my insistence, my mother gifted our grandmother's house to my sister but it all went through a solicitor. Surely, a gift of cash is much easier?
Can't you simply send your children a registered letter with all these details and info about your bank and dates of transfer? The letters should be kept safe somewhere, but with good copies stored as pdfs. I doubt that anyone would dispute this in the future. Why should they?
Steve
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- Lemon Slice
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Re: Gifting Money To Children
I think you can use any wording you like that makes clear who the gift is from and to, when it was made, that it was made absolutely (ie no reserved benefits) and and the amount.
Then keep a copy with your will.
But if you die within 7 years and they are residual beneficiaries, they may need to pay IHT on it (depending on the size of your estate and other assets of course). A letter will just provide clarity that gifts were made.
Then keep a copy with your will.
But if you die within 7 years and they are residual beneficiaries, they may need to pay IHT on it (depending on the size of your estate and other assets of course). A letter will just provide clarity that gifts were made.
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- Lemon Half
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Re: Gifting Money To Children
Blatter wrote:In order to cover them from IHT further down the line, we want to be able to provide proof of gift (i.e. scanned bank statements)
I'm not really sure what you mean here. Proof of a gift won't "cover them for IHT" if by that you mean avoid paying IHT in some way (either from your estate or theirs).
Scott.
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- The full Lemon
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Re: Gifting Money To Children
Blatter wrote:We are in the process of gifting money to both of our children. Ideally we want them to use the money for property purchase.
In order to cover them from IHT further down the line, we want to be able to provide proof of gift (i.e. scanned bank statements)
If the money is to help your children buy a house, and they also need a mortgage, then that lender will require a letter from you stating that the gift is unconditional. So you may have to write such a letter anyway. I gifted my children enough to put down a decent down payment for a property, but not to buy it outright. I insisted the gift was only to buy a house.
Otherwise an image of the cheque you write would be sufficient, I would have thought. You do not really need "proof" of a gift anyway. You already will have some documentary evidence of the gift in terms of the bank transaction you use. The purpose is really just to make sure that the executor of your Will knows about the gift and reports it.
If you and the recipient both declare that the payment was a gift, then there is not much that can refute that claim, other than you making the mistake of reserving benefit somehow.
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- Lemon Slice
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Re: Gifting Money To Children
"If you and the recipient both declare that the payment was a gift, then there is not much that can refute that claim, other than you making the mistake of reserving benefit somehow."
The problem is that after you die, you can't very well tell HMRC that the payment was a gift. HMRC might well want to treat it as though it was a loan (even if no interest payments were due). In that case problems could arise when dealing with your estate.
Best to just put something simple in writing declaring that on such and such a date you made a gift of however much it is and without reservation to your children. Tell the children to make sure they keep a copy and put a copy with your will.
Then make sure you live for 7 years.
The problem is that after you die, you can't very well tell HMRC that the payment was a gift. HMRC might well want to treat it as though it was a loan (even if no interest payments were due). In that case problems could arise when dealing with your estate.
Best to just put something simple in writing declaring that on such and such a date you made a gift of however much it is and without reservation to your children. Tell the children to make sure they keep a copy and put a copy with your will.
Then make sure you live for 7 years.
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- Lemon Quarter
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Re: Gifting Money To Children
In my case I lent the money interest fee with mortgages on the properties. After a couple of years I formally forgave the debts and released the charges on their properties. At least that way I could be sure it was actually spent on property purchase, even if I then needed to live a bit longer.
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- Lemon Slice
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Re: Gifting Money To Children
Not an answer to your question, but there are some gift exemptions from iht, for example gifts on marriage (£5000), annual gift allowance (£3000) and regular gifts from income. Might be worth looking at these to reduce potential iht liability.
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- The full Lemon
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Re: Gifting Money To Children
Laughton wrote:"If you and the recipient both declare that the payment was a gift, then there is not much that can refute that claim, other than you making the mistake of reserving benefit somehow."
The problem is that after you die, you can't very well tell HMRC that the payment was a gift. HMRC might well want to treat it as though it was a loan (even if no interest payments were due). In that case problems could arise when dealing with your estate.
Best to just put something simple in writing declaring that on such and such a date you made a gift of however much it is and without reservation to your children. Tell the children to make sure they keep a copy and put a copy with your will.
Then make sure you live for 7 years.
HMRC certainly could assert that the transfer was a loan. And with things like this they have a nasty habit of asking you to prove it wasn't rather than them having to prove that it was.
But I like to think that, despite all their zeal and arrogance, they would still need some reason to assert it was a loan. If there was no repayment, interest payments, loan document, consideration or other evidence that it was a loan contract and not a gift, then on what reasonable basis could they make that claim? I can see how they might try and identify how you reserved benefit in some way, however.
That said, it is trivial to write something to document it as a gift so you should, along with copies of the paper trail for the transfer.
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- Lemon Slice
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Re: Gifting Money To Children
Blatter wrote:We are in the process of gifting money to both of our children. Ideally we want them to use the money for property purchase.
In order to cover them from IHT further down the line, we want to be able to provide proof of gift (i.e. scanned bank statements)
Can anyone recommend a letter format/website with wording to cover gifting?
I use lawdepot for various legal forms (loans, wills)
looks like they have a form for gifts
https://www.lawdepot.com/contracts/gift-deed
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- 2 Lemon pips
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Re: Gifting Money To Children
paulnumbers wrote:I use lawdepot for various legal forms (loans, wills)
looks like they have a form for gifts
https://www.lawdepot.com/contracts/gift-deed
...and don't forget to use the UK dropdown on this website
newlyretired
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- Lemon Quarter
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Re: Gifting Money To Children
paulnumbers wrote:
I use lawdepot for various legal forms (loans, wills)
looks like they have a form for gifts
https://www.lawdepot.com/contracts/gift-deed
There really is no need for formal documentation in respect of a cash gift, still less any justification for paying for it.
Assuming the gift is made by bank transfer all that’s needed by way of evidence is a bank statement showing the relevant transfer. There’s no realistic prospect of HMRC attempting to claim it was a loan in the absence of any evidence that it was.
If inheritance tax may be an issue it’s also a good idea to place a written note to your executors (and the copy bank statement) with your original Will. This will ensure the executors can ensure the gift is properly recorded when completing the inheritance tax return. A major difficulty for executors who aren’t closely related to the deceased is that they simply don’t know whether any gifts were ever made.
Having said that, it can often be better from a purely financial point of view if executors are not aware of gifts, as declaring them can often create or increase an inheritance tax liability - where ignorance is bliss etc!
Re: Gifting Money To Children
Thanks for the replies. It would seem that a simple letter indicating that the money has been gifted will suffice.
swill453 - I want to ensure that if the money has been gifted and the seven years has elapsed, there will be no obligation to pay IHT on this gifted money.
paulnumbers - The linked form was for the US market and there didn't appear to be an equivalent UK form. Interesting site, though.
swill453 - I want to ensure that if the money has been gifted and the seven years has elapsed, there will be no obligation to pay IHT on this gifted money.
paulnumbers - The linked form was for the US market and there didn't appear to be an equivalent UK form. Interesting site, though.
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- Lemon Slice
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Re: Gifting Money To Children
Blatter wrote:Thanks for the replies. It would seem that a simple letter indicating that the money has been gifted will suffice.
swill453 - I want to ensure that if the money has been gifted and the seven years has elapsed, there will be no obligation to pay IHT on this gifted money.
paulnumbers - The linked form was for the US market and there didn't appear to be an equivalent UK form. Interesting site, though.
Ah yes, sorry about that. I've used it for various UK forms over the years, and always just sign up for a 7 day trial & then cancel. Seems to do what it says on the tin, and for basic legal documents the concept makes a lot of sense to me.
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- Lemon Quarter
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Re: Gifting Money To Children
I've posted a comment regarding lifetime gifts on another thread which may be of general interest to anyone making a Will - viewtopic.php?p=373039#p373039
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