Q My parents have unexpectedly been left £150,000 by a friend of theirs who died earlier this year. They don’t need it and would like to give it to my sister and I and our kids.

What are the tax implications of this and are there any advantages to them giving it all directly to their grandchildren, rather than us as their children? What about if they invested in a new home for us with a grannie annex and came to live there when they could no longer cope?

A What lucky parents, and lucky you. Initially the only tax that needs paying is inheritance tax on the value of their friend’s estate, which will have been done by his or her executors before your parents received the money.

If they then pass it directly to you and/or your children, the immediate tax liability they will have is any increase in value of the £150,000 between them receiving it and passing it on. Provided they do this relatively quickly their tax liability will be very small if anything at all.

Once you have received this money you will be liable to pay income tax on any income you receive, or capital gains tax if you, for example, buy shares and then sell them for a profit at a later date.

Since you told me your children are still in education and are not earning enough to pay income tax, the benefit of them receiving the money directly is they will be able to earn more income tax-free from the money than you can, since you are already a taxpayer.

In terms of how the money is given, Christine Thornley, a partner at solicitor Irwin Mitchell, suggests your parents make a Deed of Variation.

This document allows them to bypass themselves as beneficiaries in favour of you and your sister or your kids. She says: “If they do this within two years of the date of death it is treated as if the deceased left it to the new beneficiaries for inheritance tax purposes.”

However, if they chose not to go down this route, and give the money directly to you or your sister or the kids, your parents will have to survive seven years from the date of the gift for it to fall out of their estates and not potentially be liable for inheritance tax (IHT).

IHT is payable on the part of a person’s estate worth more than £325,000 — or £500,000 if a family home is involved. For couples the joint limit is up to £1million with a home if they leave everything to each other on the first death.

You also talk about them investing in your house. This is more of a grey area as if they are seen to get a benefit from the cash they gift you it becomes a gift with reservation and will not fall out of their estate.

However, if they gave you the cash and then you bought a house the link is not direct, so may be a better route.