Deed of variation to avoid possible future IHT
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Very well said! I took professional legal advice three years ago specific to gifting some funds with a view to reducing future IHT liability. The QC's written opinion was that unless I was likely to need care within three years then the gifts were not DOA. The purpose of this forum is to help people not to trot out the same old scare stories about DOA without even bothering to look at the circumstances of the person requesting guidance. Sadly a few people seem to relish doing this repeatedly.securityguy wrote: »Indeed, and it's depressing how many people in old age are having "deprivation of assets" waved at them as a bogeyman. For deprivation of assets to be at issue you have to engage in a transaction whose primary intent is to avoid immediately foreseeable care expenses. Not "depleting your savings while in good health" or "spending one of your two million pounds". Because to hear some people speak, buying a new car when you are 45, or going on a cruise in your sixties, or paying your grandchildren's school fees or mortgage deposit, or eating in a restaurant rather than begging for scraps in the street, is deprivation of assets, because, after all, you could save that money for when you are eighty instead. "Foreseeable" means "you are already in a position when it is likely that you will end up needing care:, not "you are 70". "primary intent" is where the arguments come, but if you do not have the immediate prospect of needing care, it doesn't arise anyway.
DOA does not mean "people of an age where it's possible they might need care in the next ten years must keep their savings against that possibility". Several of the transactions I have named may have IHT implications, but if you are in good health at the point at which you make them, or you are in poor health but retain assets and income sufficient to fund reasonably foreseeable expenses, they do not have DOA implications.
The classic deprivation of assets issue arises when someone who is in receipt of benefits and is the beneficiary of a will uses a DOV to pass the money direct to their children, rather than it becoming their asset and affecting their benefit. That's a much more immediate and direct chain of events.0 -
As a basic rule of thumb, deprivation of assets requires two separate tests to be met.
Firstly, one of the following is true:
(a) You are claiming a means-tested benefit; or
(b) You would be claiming a means-tested benefits were it not for your income or assets; or
(c) A reasonable person would expect to be contemplating a means-tested benefit claim in the immediate future.
And secondly, that one of the following is true:
(a) The transaction is one that a reasonable person would not otherwise have made; or
(b) The transaction's primary purpose is to alter the outcome of a means test; or
(c) The transaction is a paper or otherwise artificial transaction, including those where you retain some control over the transferred asset.
So the first set boils down to "either you're in a position to be claiming benefits, or should have realised that you shortly will be" and the second set boils down to "you're messing around with dubious transactions to improve your access to those benefits".0 -
Thanks for that. It says much the same as the advice I paid for said. Hopefully the prophets of doom on here will take notice!0
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All very interesting but totally ignoring the question that was asked by SevenofNine.
The beneficiary doing the DOV is still making a gift. All the things that apply to gifts(except the tax exemptions) apply. It does not bypass.
a DOV does not protect from a deprivation assessment where appropriate.0 -
The question the OP inter alia asked was if the DOV was effective in avoiding the funds being subject to IHT as part of the original beneficiary's estate. That has been answered. Nobody except you has raised the spectre of DOA and in view of what the OP said about the size of his and his wife's estate ability to pay for care is unlikely to be a factor anyway. Nor has anyone said that a DOV would be effective in avoiding paying care costs. In fact quite the reverse. As for your assertion that a DOV is a gift exactly what is consequences of that?getmore4less wrote: »All very interesting but totally ignoring the question that was asked by SevenofNine.
The beneficiary doing the DOV is still making a gift. All the things that apply to gifts(except the tax exemptions) apply. It does not bypass.
a DOV does not protect from a deprivation assessment where appropriate.0 -
I would hazard a guess that if someone holds assets sufficient that their estate would be subject to IHT, then a DoV relating to the accumulation of yet further assets could _never_ constitute deprivation of assets. Someone whose estate is subject to IHT has assets of at least £650k. To argue that they have any responsibility to yet further increase those assets against not merely a rainy day, but a month of torrential flooding, has no basis in reason. £650k is sufficient to pay two sets of care costs, when sat alongside the pension entitlement they are almost certain to have and non-meanstested things like attendance allowance, for almost all imaginable scenarios.
Most people don't end up in residential care. Most of those are in residential care for less than a year. £650k is about 15 person-years of residential care even if you exclude pensions, probably nearer twenty when taken in the round. To argue that someone who could fund that could be considered to deprive themselves of additional assets (not existing assets) would require that, having depleted their assets to fund care for two people for ten years or one person for twenty years (seriously?) that a later accusation could be made about financial transactions decades in the past having not piled the money still higher. I simply don't believe it, and waving it as a spectre at people (has such a thing ever happened outside the fevered imagination of some forum posters, for example?) is ludicrous.0 -
"Nor has anyone said that a DOA would be effective in avoiding paying care costs. In fact quite the reverse. As for your assertion that a DOA is a gift exactly what is consequences of that?"
DOA presumably is DOV, throughout. It would be worth editing that for clarity.0 -
Thanks I have corrected it. The perils of posting during a bout of insomnia.:)securityguy wrote: »"Nor has anyone said that a DOA would be effective in avoiding paying care costs. In fact quite the reverse. As for your assertion that a DOA is a gift exactly what is consequences of that?"
DOA presumably is DOV, throughout. It would be worth editing that for clarity.0 -
Make a will. ...
Make sure you keep below the nil rate band. ...
Give your assets away. ...
Put assets into a trust. ...
Put assets into a trust and still get the income. ...
Take out life insurance. ...
Make gifts out of excess income. ...
Give away assets that are free from Capital Gains Tax.0 -
SevenOfNine wrote: »Our solicitor said with a DoV the inheritance would be treated as if left directly to our grandsons by the deceased, not passing through our hands first. Though TBH, I'm not convinced he's the sharpest tool in the box despite his STEP membership.
Where would 'gifting' come into it?
This is correct. I got my house through a DOV - It bypassed my parent and came through to me0
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