Two gifts within the seven year inheritance rule

Two gifts within the seven year inheritance rule

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I am a widow and I have been told by a financial advisor that if I give a substantial gift to my son, be it a rental property I own or a pot of money, I can only do it once. Should I wish to give another large gift, say, two years into the seven year rule, then the first gift starts the seven year rule again.  In other words, I have to wait for the first seven years to elapse before making a further large gift.  Surely this is not correct?  I cannot find any examples of this senario on the net.

Thanking you for any advice.

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By User deleted
08th Oct 2013 17:13

Rings bells ...

... in the dim and distant past I remember something about linked PETs where the actaul period at risk could be 14 years!

Can't give any references though and may be thinking of something entirely different.

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By taxhound
08th Oct 2013 18:36

Wrong

A PET falls out of the calculation after 7 years (although chargeable lifetime transfers (CLT) can affect the calculations for up to 14 years although they themselves would not face a further tax liability if the donor dies after 7 years of the CLT).

Let's say first PET £350,000 in 2010

second PET £350,000 in 2013

No further PETs.

If donor dies before 2017, then £25,000 of PET 1 would be liable to IHT and all of PET 2 would be liable (ignoring any exemptions).

If donor dies after 2017, then only the second PET would  be liable to IHT, and this will only be if the donor dies before 2020.  If the nrb remains at £325,000, only £25,000 of PET 2 would be liable to IHT between 2017 and 2013. 

 

The possible 14 year period applies when chargeable lifetime transfers are made between years 7 - 14 prior to death and within 7 years of a later PET/CLT.

 

Look here

http://hmrc.gov.uk/manuals/ihtmanual/IHTM14511.htm

and beyond.

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By mattgriffiths
08th Oct 2013 20:40

My advice

is to get a competent financial advisor.

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Replying to sarah douglas:
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By cparker87
09th Oct 2013 15:31

Agreed

mattgriffiths wrote:

is to get a competent financial advisor.

There's a "clock" for each PET. They are all taxed at diminishing value if death occurs <7 years obviously with the older the gift at the time of death the better the tax position. I don't deal with IHT regularly but without much thought it seems the better option would certainly be to transfer it all now if you don't need/want it in your estate.

Be careful with gifts with reservation of benefit rules particularly re property.

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