Are Gifts of Cash Exempt from Inheritance Tax?
In the recent case of Hutchings v HMRC, the Court heard how a father gave his son £450,000 from an offshore bank account, a year before the father died.
The son did not tell the executors of his father's estate about this gift, despite the executors asking him twice.
When the gift was discovered, the son was ordered to pay a penalty of £87,000 by Her Majesty's Revenue & Customs.
Where a person makes a gift whilst they are still alive, this is known as a Potentially Exempt Transfer (PET). The gift only becomes exempt from Inheritance Tax, if the person making the gift lives for seven years, after the gift was made.
The case serves as a warning to both beneficiaries and executors, as to the importance of disclosing such gifts and making appropriate enquiries before Inheritance Tax forms are submitted.
This is a brief outline of the current rules and there are other factors which need to be taken into consideration, such as the size of a person's estate when they pass away.
Our tax and estate experts can help you plan effectively for the future and provide assistance for executors who are administering the estate of a loved one after their death.
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