Gifted funds can be a significant financial boost. When receiving financial support from family and friends in the form of a gift, it can feel like a blessing that helps with major life milestones - buying a home, starting a business, paying off debt. However, navigating the rules and requirements around gifted funds can be complex. Here’s our guide to help you understand the essentials.
What are gifted funds?
Gifted funds refer to money given to someone without the expectation of repayment. In most cases, these funds can come from family members or friends, but they may also come from charitable organisations. They are often used to help recipients achieve financial goals that might otherwise be out of reach.
Understanding the legal and tax implications of gifted funds
Understanding the legal and tax implications of gifted funds is crucial. For any gifted funds, the giver must provide a written statement confirming the money is a gift and that there are no expectations of repayment.
Tax implications can also be significant. Inheritance tax may also apply if the giver dies within seven years of making the gift. For this reason, it’s essential to consult with a financial adviser like us at Moneysprite. We can give you recommendations on what to do and can help you understand all the rules and requirements so you don’t lose out.
Steps for navigating gifted funds
Here are a few steps from us on how to navigate the rules and requirements associated with gifted funds.
1. Documentation
When it comes to gifted funds, documentation is extremely important. You’ll need to have a written statement confirming the money is a gift and that the giver has no expectation of the money being repaid. The document should also be signed and dated by the giver and the recipient, include the purpose of the gift, and the relationship between the parties.
2. Check lender requirements
Lenders will have specific requirements if the gifted funds are being used for a mortgage. They may ask to see proof of the relationship between the giver and recipient, evidence that the giver has the financial capacity to make the gift, and documentation stating that it is a gift and not a loan.
3. Seek tax advice
At Moneysprite, our fully-accredited financial advisers can provide a wide range of advice. And we highly recommend speaking to us regarding the full tax implications of gifted funds before you gift them.
4. Consider your financial planning for the future
Planning for the future doesn’t have to be difficult. Our financial planning advisers can offer you advice to ensure that your gifted funds and other financial plans are used effectively and align with your goals.
For help and advice on gifted funds and the implications, call us on 0345 450 4660.
