How Executors Handle Gifts Made Before Death

When someone dies, their executors don't just deal with what's in the estate at the time of death. They must also account for gifts made in the years before — identifying them, valuing them, and reporting them to HMRC. Without clear records, this process can be slow, stressful and disputed.

The legal obligation

Executors — formally called personal representatives — have a legal duty to report all gifts made in the seven years before death to HMRC as part of the inheritance tax return. This is done using form IHT400 and its supplementary schedules, in particular IHT403 which covers gifts and other transfers of value.

This obligation exists regardless of whether the estate is ultimately liable for inheritance tax. Even if the total estate is below the nil-rate band, executors must still declare gifts made in that period.

What executors need to find

For each gift made in the seven years before death, executors need to establish:

• The date the gift was made
• The value of the gift at the time it was made (not its current value)
• The recipient — their full name and relationship to the deceased
• Whether any exemptions applied — annual exemption, wedding gift, small gift, surplus income, or spousal exemption
• Whether the gift was an outright gift or involved conditions

For cash gifts, this information should be straightforward if records were kept. For gifts of property, shares or valuables, a professional valuation at the date of the gift may be required.

What happens without records

If the deceased kept no records of their gifts, executors face a difficult task. They typically have to:

• Go through years of bank statements looking for unexplained transfers
• Contact family members and ask them to recall gifts they received — often years ago
• Make their best estimate of values, which HMRC may challenge
• Risk underreporting, which can lead to penalties and interest

This process can add weeks or months to the probate timeline, at a time when family members are already under considerable stress. In some cases, disputes arise between family members about what was given and to whom.

How gifts affect the inheritance tax calculation

Once identified, gifts are applied to the estate calculation in chronological order — oldest first. They are set against the nil-rate band before the rest of the estate. This means a large gift made six years ago could reduce the nil-rate band available for the current estate, potentially increasing the tax due on it.

If a gift was made more than three years before death, taper relief may reduce the tax rate applicable to it. But taper relief only applies if the gift itself exceeds the nil-rate band — executors need to work through the calculation carefully, often with professional help.

When recipients may owe tax

If a gift fails the seven-year test and tax is due on it, the liability falls primarily on the recipient, not the estate. This can come as a significant surprise. A person who received a generous gift several years ago may find themselves facing a tax bill after the donor's death — often with little warning and sometimes with no awareness that the gift could ever have had tax implications.

Executors must identify these recipients and notify them of the potential liability. Clear records from the deceased make this considerably easier and less contentious.

The executor portal on EverLedge

EverLedge allows you to share a secure, read-only access link with your executors so they can see your estate records — gifts, assets, documents and key dates — before they ever need to act on them. This means that when the time comes, your executors arrive informed rather than having to start from scratch.

In short

• Executors must report all gifts made in the seven years before death to HMRC.
• They need the date, value, recipient and any exemptions for each gift.
• Without records, the process is slow, stressful and prone to error.
• Gifts can affect the nil-rate band and may create tax liabilities for recipients.
• Clear records — kept by the person making the gifts, shared with executors — are the single most effective thing you can do to make the process manageable.

This article is general information about UK inheritance tax and is not personal or legal advice. Rules and thresholds can change. Consider speaking to a qualified adviser about your own circumstances.