question category: IVA

How much money can i give to a relative with an IVA before causing tax issues for myself


A relative would like a relatives will chnaged so that i get their proposed share and rather than the monies going straight to creditors of an IVA they have entered in. It is proposed that I then gift the monies to them so that they can make an offer to clear the IVA. I am concerned over the implications for me.

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Re: How much money can i give to a relative with an IVA ...

If my understanding of your question is correct then there are a couple of areas to consider.

A will sets out who is to benefit from an individual’s property and possessions (their estate) after their death and it is not unusual for a person to change their will several times during their life. Their property and possessions and the people who they may wish to leave it to may change http://www.direct.gov.uk has some useful information on making a will.

Whilst someone is in an IVA they have an obligation to notify the Supervisor of their IVA (the Insolvency Practitioner) of any assets they receive. An inheritance of cash or property would be dealt with as an asset of the IVA. A clause in the standard IVA terms and conditions defines the time that the person has available to deal with this. It is usually to notify the Supervisor within 1 month of receiving and then within 3 months to make reasonable steps to realise the asset. Assets must only be sold or realised to the extent necessary to repay the creditors in full. e.g. inheriting a portfolio of properties would not necessarily mean that all would have to be sold. It may only take the sale of 1 property to settle all debts so this would be the requirement.

With regards to settling an IVA by gifting money. An IVA is a means of repaying the amount that is actually affordable whilst maintaining a reasonable standard of living. In most cases the IVA would last for 5 years and then the rest of the debt would be written off. Negotiating an early settlement of an IVA by gifting a sum of money is certainly possible. If it is clear that this will provide the creditors with a better return than they would receive if the IVA continued then it would be very unlikely that they would object.

This question was answered by Debt Advice Foundation, an independent UK debt advice charity. If you're considering entering into an IVA, Debt Advice Foundation provides a free, confidential helpline and can advise you on whether you qualify. Click here to find out more.

 

Re: How much money can i give to a relative with an IVA ...

I assume there is to be a time lag between you receiving the money and then ‘gifting’ it to your relative? And therefore your relative assumes it will be dealt with differently at different times. Under either circumstance the money is being used to clear debts/pay off the creditors, whether the money is inherited or gifted.
Inheritance tax is calculated on the estate of the deceased person, so by ‘inheriting’ more it will not cause you to pay more tax.

This question has been answered by Christians Against Poverty, a leading debt charity offering hope and a solution to anyone in debt.

 

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