MIL has a lot of money. Advice?

Darlyd

Hello, I have posted this on a few boards, not sure where it belongs . Anyways

My husband told me everything today about MIL. I knew she always had some money put aside, (good on her) She never spends it on rubbish, never went out for meals, always brought packed lunches etc, very old school..

Anyway FIL passed away last year (god rest his sole), and only now probate has finished (I think). Well she has over 200k in total (I think, there about's) She owns her own home (mortgage free). She has opened a few ISA's in her name and my husbands name, I think even in my DD2 name. She has been told that she can only gift just over 3k a year to any one person by a financial adviser (hubby was there).

Hubby is worried about her having to pay tax on her money in the future, money they worked buddy god darn hard for. (She was a district nurse, FIL was a factory worker, Plus inheritance from relatives).

The reason for this post is to ask any professional/person with experience as to what she can do with this money? I know hubby is dying to ask her for some money for our own home improvements but she always wants us to pay back, I loaned some money off of her for a car last year and I been paying her back £200 a mnth (don't blame her). I am dying to ask her to buy a care home so I can run and have an amazing always wanted career, she will think about it don't get me wrong, BUT how can she go about this? Can she buy one and gift it to us? I don't understand, nor does she (I don't think). Just want her to do right with her money.

She also has a daughter (both adopted) But she is an acloholic/drug addict and only bothers with her when she has no money, MIL helped hubby out with vets bills last week (He has to pay back, added onto his monthly debt) And she feels bad and is offering to give her DD money to the same value, Hubby has told her she will just p it up the wall, so MIL is indecisive. hmmm tough decision.

Just want what's best for her, And I know she wants what is best for her kids, (even if she don't get on with DD), Think the main question is about TAX ... It's her bloody money, tax already paid as and when they earned it.. Makes my blood boil

hcb42

as I said somewhere else...not sure what the question is.

The only one I saw is what she can do with the money, which of course is whatever she likes.

Darlyd

hcb42 wrote: »

as I said somewhere else...not sure what the question is.

The only one I saw is what she can do with the money, which of course is whatever she likes.

Many questions. Let me summarise.

If she bought me a care home, how can she transfer it to my name without having to pay tax. ? (financial adviser told her she could only give just over 3k a year to any one person without having to pay stupid amount of tax on her own money).

where can she put her money without being stupidly taxed on in the future? (of course under mattress lol)..

Many more question, I am sure I asked in OP.

heretolearn_2

Not too sure what the question is either, unless it's a very well disguised 'how can we get MILs money without having to pay inheritance tax?'.

This all seems to be about how to best transfer this money to other family members, nothing about what is best for MIL at all. What tax issue does she have? The only tax she might pay on it is on interest it earns from the bank - why do you think she might have to pay more tax on it in future? She won't.

Depending on the value of her home, there may or may not be inheritance tax to pay, but that's only after she's passed away, so hardly her problem! If you are concerned about this you could raise it, I suppose, but you can't force her to do anything. I think your idea of getting her to spend all her money in buying and then giving you a business is shabby of you. It's her money. Do what you like with it after she dies. ~why are you all expecting her to hand it over to you now? Why don't you encourage her to enjoy herself a bit more and spend some on herself is she's worked so hard for it.

hcb42

why will SHE be taxed in future? You are taxed at source on interest on savings, and on earned income, but that's it.

Does she want to buy you a care home? Is she earning an income from running one at the moment? She does not seem keen on giving her money away to her kids, presumably as she believes they can stand on their own two feet. Any tax liability after she is gone will fall to the estate of course, not to her - depending on the total value of estate and the inheritance laws

No she cannot buy a care home for you to run and avoid tax.

I am not sure what tax you are talking about assuming she has this cash in a bank. No one is taxing me on my savings although they do take tax off the interest (except for my ISA, obviously)

hcb42

heretolearn wrote: »

Not too sure what the question is either, unless it's a very well disguised 'how can we get MILs money without having to pay inheritance tax?'.

This all seems to be about how to best transfer this money to other family members, nothing about what is best for MIL at all. What tax issue does she have? The only tax she might pay on it is on interest it earns from the bank - why do you think she might have to pay more tax on it in future? She won't.

Depending on the value of her home, there may or may not be inheritance tax to pay, but that's only after she's passed away, so hardly her problem! If you are concerned about this you could raise it, I suppose, but you can't force her to do anything. I think your idea of getting her to spend all her money in buying and then giving you a business is shabby of you. It's her money. Do what you like with it after she dies. ~why are you all expecting her to hand it over to you now? Why don't you encourage her to enjoy herself a bit more and spend some on herself is she's worked so hard for it.

I presume I am not the only one alarmed by the irony in the OP. giving money to DD is frowned upon but OP and hubby want it for home improvements and to run a business....and so they can avoid tax.

She is probably rewriting a will and leaving it to the cats' home.

Darlyd

NOOOOOOOOOOOOOOOO you have got me totally wrong !!! SHE Wants rid of this money, she wants to see it go somewhere good, she does not want to have it all left when she is dead, She enjoys her life, she lives comfortably (obviously not to well after FIL passed away). She is concerned about the tax, she has been told she will end up paying lots of tax in the future AND does not want her son (who is next of kin, my husband) to have to pay any tax on HER money either. (she has gone through it with FIL and her own parents). Hence me asking on here, for experiences on what she could do with it without having to pay stupid amounts of tax.

I told her I would ask on her, She is going to read through the posts (hi mum) For advice on what to do..

She wants to gift big amounts, but was told she could only give just over 3k per year per person without being taxed big time on it... GET ME?

JodyBPM

£200K plus a house owned outright is a reasonable sum, but not a huge amount. From an inheritance tax point of view, I think the cut off is around £650K, so unless the house is worth £450k ish then she won't be into the realms of IHT. She will only be paying tax at the normal rate on any income from her money, not capital.

To avoid inheritance tax, she can give away up to £3000 a year IN TOTAL, I believe that will be disregarded from her estate. All sums will be disregarded after 7 years. But unless she is into the IHT bracket above, this is not relevant.

Should she need to go into a care home in the future, she may have to pay fees, which could seriously deplete her estate. ANY deliberate spending or gifting of money to avoid this will fall foul of the "deprivation of capital" rules. But she could look into buying an immediate needs annuity should she come to a point that care is needed.

My best advice to her would be to hang on to her money and enjoy the rest of her life in the secure knowledge that she has the money to look after herself. That extra money may help her to stay in her home longer etc when the time comes, and to enjoy her retirement.

If she gives money to you now, that will not "save tax", it will simply lessen her own financial security.

CLAPTON

well actual facts always help

assuming her husband left everything to you MIL then when she dies inheritance tax (IHT) will be payable on everything over 650,000

so first question; how much is she worth? if lesss than 650,000 then no IHT will be payable.

now if she has more than 650,000 then tax will be payable on her death from her estate.

now she can give whatever she wants away without any immediate pay : however if she dies within 7 years then the value of the gifts will be 'added' back to her estate for IHT purposes: this will of course be no worse than if she had given nothing away and of course if she lives more than 7 years then less tax will be paid.

second question..how old is she and is she liekly to live 7 years

now there is an exception from the above; she can give £3,000 per year away without any 7 year rule applying which is why she is confused by her fonancial advisor; however as I've already said there is no reason to delay giving money away as if she doesn't it will be taxed anyway.

Darlyd

THANK YOU

I will show her all these posts tomorrow. you have all been more helpful than the weird woman (as she calls her) in bank on Saturday

paddedjohn

just a point, you say the your hubby is next of kin but surely his sister is equal if the mil dies.