Large lump sum as a gift

dfarry

Hi..

I've read this post but it's not really too clear around implication of receiving a large cash gift so I'd appreciate any other advice based on my example...
http://forums.moneysavingexpert.com/showthread.html?t=2061541

My father died a year ago and my mother started living with my sister, now my parents home has been sold my mother wants to rent a small flat near my sister. My mother receives a pension that cover general living expenses etc...

As a result of the sale of my parents house my mother wants to give me (and my brother and sister) £30000 each to help us pay off our mortgages etc... This will however leave my mother with a small amount of savings.

In my own case I have an offset mortgage so as soon as I deposit this cheque I will start saving interest, what I am concerned about is capital gains tax however. Someone said that I might have to pay CGT if my mother was to die in the next few years, is that correct and to be honest how would the inland revenue even know?

No one likes tax but the years my parents have worked (on very modest salaries), never been unemployed or used state benefits, CGT like Inheritence tax seems really unfair

Anyway, any advice will be most welcome.

Cheers

DAN

zzzLazyDaisy

There is no CGT on a gift.

However, if your mother dies within 7 years inheritence tax MAY be payable.

It will depend on the size of the estate, but any IHT won't be any more than would be payable if the gift had not been made, and may be less. If she survives for more than 7 years after the date of the gift, no IHT is payable.

Hope this helps

EDIT: the nil rate band for this year is £325,000. Also if your father left everything to your mother, she also 'inherits' his nil rate band. Any estates below these limits are free on IHT anyway. So if your mother's assets fall within the limits, then it will make no difference whether she gifts the money now or on death, no IHT will be payable.

dzug1

There's a separate 'deprivation of assets' issue should she need to go into care in future. Her fees will be assessed as if she still had the money she gives you.

dfarry

Thanks for the advice... very reassuring...

From the sale of the house my mother received £110k, additional savings might be a thousand or two extra but no more and the pension my mother receives is just under a thousand pounds each month.

So I think we are well within the tax threshold. Should my mother need special care then this would be provided by our family or at least out our expense. I see elderly people every day with no one to care for them, it's very sad and our family would not allow this to happen to our mother.

Primrose

Obviously if you and your sister take this money, you won't be able to use it to reduce your mortgages if there's a chance that you may need to draw on it for your mother's care costs at some point in the future. You don't say how old your mother is or how far off she might be from needing care. Does anybody know how far back the local authorities delve into personal finances to check whether the deprivation of assets rules apply? There must be some cut-off point which is relevant, i.e. they surely can't say that a parent aged 50 was depriving themselves of assets if they gave money to a child when at that age most parents are still fit and healthy? (Or can they ??)

zzzLazyDaisy

Just to be clear........

I didn't spot the link to the post about care costs when I made my post about CGT/IHT, so apologies for the oversight.

The deprivation of capital in relation to care home fees is a separate and complex issue. If the money is given away with the aim of avoiding care home fees, then that money can be recovered at any time.

Obviously the closer this happens to the donor moving into a care home, the more likely it would be that this would be considered to be deprivation of assets.

On the other hand if the donor is in good health, living independently, and has good reasons for giving the money away that can be proved, there MAY be a case for saying this is not deprivation of assets (note the word MAY). You need professional legal advice about this aspect, it really isn't something that people on an internet forum can advise you about as every case turns on its own particular facts.

CLAPTON

zzzLazyDaisy wrote: »

Just to be clear........

I didn't spot the link to the post about care costs when I made my post about CGT/IHT, so apologies for the oversight.

The deprivation of capital in relation to care home fees is a separate and complex issue. If the money is given away with the aim of avoiding care home fees, then that money can be recovered at any time.

Obviously the closer this happens to the donor moving into a care home, the more likely it would be that this would be considered to be deprivation of assets.

On the other hand if the donor is in good health, living independently, and has good reasons for giving the money away that can be proved, there MAY be a case for saying this is not deprivation of assets (note the word MAY). You need professional legal advice about this aspect, it really isn't something that people on an internet forum can advise you about as every case turns on its own particular facts.

In practice, would a lawyers considered view be any better ...
is there much case law that one can refer to?
does it vary between one council and another
may practice change in future

zzzLazyDaisy

http://www.ageconcern.org.uk/AgeConcern/transfer-of-assets.asp

The above link provides an age concern fact sheet about this.

The bottom line is that there is no time limit on the local authority's ability to seek to recover assets. The key issue is whether it is deliberate deprivation and that is decided on a case by case basis. Yes there is case law about this (see the fact sheet).

The point about getting professional advice is that not only can the adviser explain what the pit-falls are, but may be able to help the donor to take steps to avoid them, by setting out very clearly in writing what the intention behind the gifts actually is, and perhaps providing evidence of the donor's health or whatever. I can't really comment further as it isn't my field.

The advice doesn't necessarily have to be from a lawyer, it may be that Age Concern have professional advisers. What I do know is that this is a potential mine field and if the LA subsequently decides to litigate (and this is £90,000, so potentially worth litigating) the LA employs in-house lawyers and its pockets are likely to be deeper than OP's. So if it was me in that situation, I'd take advice on the best way to achieve the desired outcome.