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Inheritance Tax or no IHT ?

Inheritance Tax or no IHT ?

Now that the Euromillions lottery is offering huge prizes and also the Millionaire's raffle, I was asked by a friend what the IHT consequences would be if he bought a lottery ticket and gifted half to his children. My immediate thought was that he would need incontrovertible proof that the gift was before the draw and not after. His response was that he could email the numbers to his children after purchase and before the draw.

I believe that the gift would then be the paltry share of the ticket, or am I wrong? I had an instance some years back of a client buying some Premium Bonds for a grandchild who then won £5,000. That was obviously the child's good fortune and little to do with the grandparent.

What do others think?


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15th Jan 2013 14:00

IHT or not IHT

I agree, I think: if the gift is made (I would suggest something simple in writing - he could use the same word template re-dated for each weekly ticket he did this with) whilst all he holds is the ticket, the gift is of the face value (i.e. 50% of whatever he paid for the entry - and de minimis - though it is probably within the £250 small gifts exemption for each child anyway, if you wanted to split hairs). All any of the parties has at that stage is a right to be entered into the draw, and the diminution in value of his estate is just that - 50% of what he pays for the entry.

However, if the gift is made after it is already known that the ticket has won (say) £1m, i.e. after the numbers have been drawn, then his estate is diminished by the £500k that he will pay over to his children - which will be a PET and - subject to the available nil rate band(s) and annual exemptions, be taken into account in his cumulation, should he be unlucky enough to die within 7 years.

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