money from mum as a gift

poppy_f1

apologises if in wrong place
my mum is planning on selling her house and going into (hopefully) a council house (my dad died last month and she no longer wants to stay here and also help me on my way to buying somewhere)
is there any legal/tax implication if she gave me say 2/3rds of the money as a gift, the way she sees it is like getting my inheritence while shes alive (we dont have to worry about inheritance tax, that much i do know)

Robert_Sterling

If your mother sells her house it may be considered that she is deliberately making herself homeless and I am not sure that it would go down well with those who allocate council property to tenants.

poppy_f1

Robert_Sterling wrote:

If your mother sells her house it may be considered that she is deliberately making herself homeless and I am not sure that it would go down well with those who allocate council property to tenants.

she wont be homeless as such as she will be living with me in the interim, shes already on the council waiting list due to medical reasons (she really cant manage the stairs in the house) but obv selling up and moving in with me will speed the process up slightly
the council are aware that she currently owns her home and when we enquired if this would affect her application they said no

Robert_Sterling

It depends on your monther's state of health.
If she might be expected to go into a nursing home in the not to distant future then she should not give her money away as it may be needed to pay nursing home fees.

jenniferpa

And don't forget, if she need to go into a nursing home in the near future, simply having given away the proceeds of her house sale will NOT be sufficient to protect them. Social Services are more than capable of clawing them back. While your mother's estate might not trigger inheritance tax, there may be also be CGT implications.

poppy_f1

Al_Mac wrote:

She cant just give you loads of money, the tax man doesn't like it.

I could be wrong, but I think there is a £3k limit per annum.

:beer:

thanks

her health isnt as bad that she would need to go into a nursing home unless it really deteroiates, she has had a major op and is waiting to get a hernia op which limits her mobility

clairehi

Bear in mind that if your mum dies within seven years of giving you the money, it may still be subject to inheritance tax.

Petmidget

Several issues here.

CGT, not a problem sale of house is exempt assuming her main residence.

IHT, if the total estate is under nil rate band by a significant amount which you seem to indicate, then wont be an issue.

As for giving people money, you can give anyone anything you want. Taxman will only be interested if that gift falls inside 7 years before death of donor AND donor's estate is big enough to be taxable. So would appear not to be an issue.

So your only real concern should be potential care home costs, if your mother is in reasonable health not a problem. If you have spent the money even on an asset and they come calling it would be difficult for them to claw it back. Can you imagine them try to get you to sell your new family house to cover the costs!!

As for council housing, I dont have any knowledge of the area but unless it is based on health grounds I would be surprised if they didn't at least raise an eyebrow at someone selling up, giving away the cash and asking to be housed. They could say she is in a position to obtain a retirement flat or similar. But as I said no knowledge on this area

jenniferpa

Petmidget wrote:

So your only real concern should be potential care home costs, if your mother is in reasonable health not a problem. If you have spent the money even on an asset and they come calling it would be difficult for them to claw it back. Can you imagine them try to get you to sell your new family house to cover the costs!!

Actually, they'd probably just get a lien on it. In this area, the approprate regulations place a lot of emphasis on the intent at the time of transfer. From what the OP says, the intent is not to hide assets, and that goes a long way should it come to a court case. Obviously, to a certain extent you're at the mercy of your local council. If your Mother is reasonably healthy and the nursing home scenario is likely to be several years down the line, you'll probably be OK.

Re the issue of intentional homelessness and council housing, there's a thread on the Silver Savers board that indicate that diffferent councils have different policies on this, particularly as it relates to housing for seniors.

Jennifer

LOST

She can sell her home and it would be not liable for CGT as it is her principle residence. I presume the 1/3rds of the proceeds she will keep is for mursing costs etc...

An individual may only make annual gifts upto £3k per year. Anything above £3k per year is subject to a lifetime IHT charge of 20%. If the donor (your mum) dies within seven years of making that gift you will be liable for IHT of 40% which decreases on a sliding scale depending on how long ago the gift was made.

Therefore, upon death with 7years, any gifts under that £3k annual allowance would be chargeable upto 40%. Any gifts above the £3k annual limit upon which a lifetime charge of 20% tax has been paid, would also be subject upto a further 20% (to make the death charge of 40%).

Also any gifts made with 7 years of an individuals death will automatically still fall under their estate (no taper releif) and therefore further IHT liability maybe due if the estate is above £285k (please check figure for 06-07 tax year).

Mitigate via an inter vivos decreasing term assurance on the gifts so that the IHT liability is covered in the event or your mother passing away with the 7 years...

Also, she may think of setting up a trust with the proceeds of the sale of the house thereby reducing here estate value and you being the eventual beneficiary.


You should consult some professionals on which approach(es) would best suit your needs.

Cook_County

I am sorry, but I find your post offensive and one you should apologise for. How dare you call another poster's statement "drivel" - not once but twice - and then call yourself a professional!

Please put up or shut up.

Future self-advertising should be confined to the referrers board only; other posters are only trying to help - even if they get confused over tax and finance as many of us do.