Dad dying should we put money into childrens names now or later?

CLONNEN

My dad has just announced that he's been told his liver is packing up and that he wants me to move the money I have been saving in a Mini Equity ISA for the two boys into savings accounts in their own names before he kicks the bucket.

Is his suggestion wise or should we leave it in the ISA until the boys are older. They are currently 14 and 11 so they can't have their own ISA accounts until they are sixteen. The ISA is currently in my name and comes to approx £8000 at the moment so they would have £4000 each if we closed it now.

To my way of thinking we would be better to wait until they are sixteen and then close my Equity ISA and open one (preferably a Cash ISA) in each of their names. At least then it would retain tax-free status.

If we move it now into their Nationwide Savings Accounts (which are already at the maximum limit as far as gross tax is concerned) they would only get the Net rate on the £4000.

CLONNEN

Also won't the money count as part of my dad's estate if we put in the boys names when it comes to working out death taxes, IHT or whatever.

Since I am over 18 my money doesn't count towards my dad's estate.

jennifernil

If he has given you the money to save for them and dies within 7 years of having done that then no matter where the money is it would still be liable to IHT if his estate was over the limit.

I don't really understand how moving if would make any difference to that.

The boys are entitled to their own tax allowances, so they must already have a lot of savings if they have used that up.

CLONNEN

No it is not my dad's money that has been saved.

I save £50 a month out of my salary and put it into the Equity ISA via direct debit. I still live at home so this arrangement is basically my rent.

I also give £300 to my youngest sister who is age 8 every year on her birthday which gets put into Premium Bonds in her name.

The boys have £3000 each in their Savings Accounts which I am told is the limit for Gross Tax.

CLONNEN

Another thing I should mention is that my parents are living on Benefits and I think that is where we got the £3000 limit per child thing from.

My dad is retired and my mum has never worked in a salary paying job having been a housewife since the age of 19 so she doesn't pay any tax. Maybe we should move the money into her name? Although again when dad dies doesn't her money count as his since it is all in joint accounts?

JimmyTheWig

I think if you were doing this in lieu of rent then it could be seen as being your dad's money and then part of his estate.
But as they are on benefits I will assume that his estate won't be hitting the threashold for IHT (especially given that he can pass assets freely to his wife), so this part of it is irrelevant.

If it is just a case of the boys having to pay tax on this money then we're talking about a difference of about £50 a year each. (20% tax on 6% interest on £4000 is £48) They've got 7 years between them before the money can go into ISAs. So this would cost your family £350. Not the best thing to do, MoneySaving wise, but not a great deal to be lost to honour your dad's dying wishes.

But if the point is how much money can the boys hold without your parents' benefits being affected (which sounds more likely, from what you have said) then it may end up costing much more than this £50 a year tax on interest. And it is your mum who would suffer this financial loss. What does she think about the idea?

On the other hand, it sounds to me like you are holding this money for your brothers so that your parents can claim benefits.
I have no idea if this is legal.
You may have a clearer concience (sp?) (and maybe this is what your dad wants?) by coming clean and giving them the money and accpting the consequences.

JimmyTheWig

sloughflint wrote: »

This is a very grey area. Could be seen by whom?

Don't know, really. Anyone who knows about it?

The executors will have to declare the size of OP's father's estate. Depending on who they are, would they even be aware of this private family arrangement?

Agreed, but that doesn't make it ok. They might also be unaware if someone had £8000 in a biscuit tin under the bed.

JimmyTheWig

sloughflint wrote: »

Regardless of the rights or wrongs.

Not the way I operate on this site, I'm afraid.

Am more than happy to help people around loopholes, but this to me smacks of benefit fraud.

I'm bowing out of this one...

Farway

Ignoring any other aspects of "right and wrong" regarding benefit and other issues, there is also the very practical issue in these current credit crunch times

Yo may have paid about 8k into it, but as equity is share based then the I doubt if it worth that much now [unless you valued it recently]

So selling shares, which is what you would be doing in effect, would be very likely be losing a few grand from the 8k paid in

As it is for siblings long term it really would be wiser to leave the equity ISA alone and wait a few years or longer, for any stock market recovery

arealbasketcase

Not not giving medical advice just an opinion....

The liver is probably the most adaptable organ in the body, so don't give up on your dad just yet. My friends dad should have died from liver failure 20 years ago and is still very much alive and kicking!