What to do with complicated 5k!

mcspanna

Hi All,

Hoping this is in the right place?!

OH has just received a cheque for 5k from his mother. OH is currently unemployed but in the process of starting a business (not registered/earning yet, so still a non-tax payer)

MIL is mid seventies, possibly just starting to go senile (5k is a helluva lot of money for someone in her position - council sheltered accommodation - Pension as income - we're not aware of her having significant savings etc).

OH has spoken to his mum who insists that we take the money despite our concerns hence plans to split money as follows:

£500 towards business set up
£500 spending in near future (MIL suggested spending it all!)
£4k saved - not least because if MIL is going senile she may need it back (we would make sure she was OK regardless)

Questions:

1) Where's the best place to put the 4k? OH banks with NatWest and apparently has an ISA linked to his current (STEP) acc which he hasn't paid into this year - given that he doesn't currently pay tax, is this as good a place as any?

2) Inheritance tax (realise this may not be the right board for this) chances are that MIL may well die before 7 years is up - all we have written down from her at the moment is a christmas card saying here is the money which I give as a gift so I know you have it before I die etc etc...

Any comments/suggestions gratefully received. We have a joint mortgage but bank separately for everything else. I have said I don't think it's wise to put any of it as overpayments on our mortgage so as to keep things clear, and that ultimately it's his decision what to do but he's not a MSE so any advice/guidance that I could pass on to him would be gratefully received!

Thanks,

Mcspanna

freddysmith

On reading this and in my own personal point of view I would just put the money into an easy access account or ISA and keep it their for the MIL incase she or OH needs it for future caring costs that may arise.
I believe you are allowed to gift a £3000 sum per year without penalty.

freddysmith

I have found some info which backs up the £3000 limit which might help.

http://www.hansonwealth.co.uk/inheritance_tax/landing_page.asp

jem16

mcspanna wrote: »

MIL is mid seventies, possibly just starting to go senile (5k is a helluva lot of money for someone in her position - council sheltered accommodation - Pension as income - we're not aware of her having significant savings etc).

2) Inheritance tax (realise this may not be the right board for this) chances are that MIL may well die before 7 years is up - all we have written down from her at the moment is a christmas card saying here is the money which I give as a gift so I know you have it before I die etc etc...

From what you say above Inheritance Tax doesn't look to be an issue.

MIL will have £312,000 of her own Inheritance Tax threshold. Plus she may also be able to use FIL's (if applicable) threshold making that £624,000.

mrposhman

It appears from what you have said that inheritance tax is a non-issue. It appears you are unaware of her having significant savings and she lives in sheltered housing so therefore the following appears like it wouldn't apply for you.

"Not everyone pays Inheritance Tax. It is only due if your estate - including any assets held in trust and gifts made within seven years of death - is valued over the current Inheritance Tax threshold (£312,000 in 2008-09). The tax is payable at 40 per cent on the amount over this threshold"

Source http://www.hmrc.gov.uk/inheritancetax/intro/basics.htm

I would put it in an easy access cash ISA. Tax free savings income and if you need it, its there.

www.moneysupermarket.com should provide a good list of available ISA's but do check each one as to when the rates apply from. If they are before or around the date of the last interest rate reduction then I would question their rate before signing up.

mcspanna

Thank you everyone - all of the replies were fab. Happy Christmas to you all :beer: