Gifting money to relatives

DragonLady · 5 November 2015 at 3:59PM

I wonder if anyone out there can help confirm my understanding or put me onto the right track!

My aunt is 90 years old and comfortably off with savings. She has recently had a health scare (aortic aneurysm) and it's made her think about her future. She has asked me (as her Power of Attorney) to make payments to her three great nieces and their mother (her nephew's wife) of £5k each as a gesture. She hadn't seen them in a very long time (old argument!) but they'd sent a genuinely caring card when she was unwell and it has piqued her conscience! She now feels bad about the argument and hence the desire to 'make amends'!

My aunt's will doesn't include these 4 family members at present, so she wants to make separate payments. My concern is whether I can make the £5k payment to each...or it would come under scrutiny. I know there is a cap of £3k per annum, but does that only apply if her estate were to be affected by IHT?

Her savings amount to about £185k and she has a property that is worth about £140k. Her threshold for IHT would be £650k, as her late husband left everything to her, so as I understand it, she gets his 'allowance'.

So can I make the payments? Or do I have to limit the payments to £3k total after all?

Many thanks!

cte1111 · 5 November 2015 at 4:08PM

There is no gift tax in the UK. If your Aunt's estate were to be within (or near) the inheritance tax threshold, then the gifts might become relevant, if she were to die within 7 years. However, you have indicated that her estate is well within the current IHT limits, so this does not apply.

The final consideration should be whether these gifts could be considered 'deprivation of capital', if your Aunt was to need care in the future. It doesn't sound as if the main purpose of the gift is to avoid paying for care, as it is instead to try to make amends. Given that she has quite a reasonable amount of capital still left after the gifts, then it would be unlikely to be picked up as DOC (although I am not an expert in this area).

So overall, it should be fine for the gifts to be made. However it might be that an alternative would be to instead make a new will that included these relatives. This would avoid any doubt but would be less immediate and might not suit your Aunt as well from the point of view of making amends.

I'm an accountant and have had POA for relatives in the past. I think if I were in your situation, I would be quite happy to make the gifts from capital without being too concerned about any DOC ramifications.

DragonLady · 5 November 2015 at 9:08PM

Thank you!

Gers · 9 November 2015 at 10:08AM

The advice you've been given is absolutely right though I would add another thing. Make sure you show a clear trail of the gifts and memorialise the decision made by your aunt. This protects you against any accusations of misusing your POA.

dunkrose · 9 November 2015 at 2:26PM

Can anybody expand on this issue and probable complications once the relative is already in a care home?
My parents put my grandmother into a care home in January and didn't gift any of her money before doing so.
We have since realised there is this £3k/annum max gifting clause. How closely is this monitored? And by whom? What if my grandmother wanted to assist a child, grandchild or great grandchild to assist them in buying a house/car for example? Is this not legally possible?
I'd really appreciate some professional advice re this if anybody can recommend such a person?
Many thanks.

Savvy_Sue · 9 November 2015 at 2:38PM

It makes no difference where the person is living. Do your parents have power of attorney? What gifts was your grandmother in the habit of making?

p00hsticks · 10 November 2015 at 8:38AM

dunkrose wrote: »

My parents put my grandmother into a care home in January and didn't gift any of her money before doing so.

Who's paying for the care home ? (Is she self-funding or are the local council contributing? )
Is your grandmother mentally capable ?

dunkrose wrote: »

We have since realised there is this £3k/annum max gifting clause. .

There's no 'max gifting' . Basically, the £3k amount is the amount that can be excluded from any future Inheritance Tax calculations if the person gifting dies shortly after making the gift - but in general, there are no laws in this country that prevent anyone giving any amount of money or gifts to any one else.

HOWEVER - there are a couple of provisos to this.
if the council is contributing to the costs of the care home, then she can't just give the money away, it needs to be kept to go towards her care (see ' deprivation of capital').

And if she is no longer mentally capable of making financial decisions and someone has Power of Attorney for her, then they are legally obliged to act in her best financial interests - and this will never include giving any of her money away.

Savvy_Sue · 10 November 2015 at 12:51PM

p00hsticks wrote: »

And if she is no longer mentally capable of making financial decisions and someone has Power of Attorney for her, then they are legally obliged to act in her best financial interests - and this will never include giving any of her money away.

With certain exceptions. If she was in the habit of giving generous gifts at Christmas, on birthdays and for other life events, then the attorney can continue to be generous. If she merely slipped the odd fiver in a card when she remembered, that's all the attorney can do.

macman · 10 November 2015 at 7:08PM

You can gift out of surplus income, if you can demonstrate that the standard of living is not being reduced as a result of such gifting.

Gifting money to relatives

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