Money gifted before death

Mojisola

puddy wrote: »

ive obviously misunderstood, why wouldnt the OH inherit without a will if FIL died first, isnt the OH the son of the MIL? he would be first on the list (along with any other sibs)

Sorry, got mixed up with the other thread about a FIL and a stepmother.

donquine

Sorry for the late reply, OP. Thinking out loud here....

As FIL is unlikely to survive 7 years, possibly not even 1 year, if the £30k is not desperately needed by your OH right now, it makes sense to leave the bulk of that in FIL's estate and gift it to your OH in FIL's will.

Any is quite correct that there is a £3k exemption for gifted cash each tax year - it's worth pointing out that if FIL hasn't used up that allowance this year, or in the previous tax year, FIL can gift £6k to your OH and that will be completely exempt from the charge to IHT. There won't be any CGT on the gift now either - cash is not considered a chargeable asset within the scope of CGT.

If the £30k is gifted now, the non-exempt part may become taxable if FIL does not survive 7 years. There is taper relief available, so the longer FIL lives, the lower the tax payable, but if the cash is not urgently required, the tax can be reduced completely by deferring its receipt until FIL's passing.

Due to the small size of the estate, anything in it will be under the threshold for IHT.

Due to MIL's domicile, anything FIL leaves her will be exempt from IHT.

However, as MIL is incapable of signing any legal documents and/or making decisions, FIL has to bear in mind that no one can at present help MIL make smart decisions with the assets/cash left to her. MIL already has all the savings and investments in her name - POA really needs to be in place so family (e.g. your OH) can help her manage her affairs.

At the moment, FIL is presumably dealing with bills etc. If MIL is capable of remaining in their home after FIL dies, she will no doubt want to stay put, however if she forgets to pay all the bills that come in and/or gets confused, she's going to get herself evicted. I guess if the bills are in joint names now, FIL can make your OH another account holder, so OH has the authority to speak to the companies when FIL is no longer around, but having POA would be a better solution, IMHO.

As the estate is going to be well under the IHT threshold, the amount that doesn't get used up will eventually increase MIL's threshold, so I would imagine if anything is left by the time she passes away, it will probably be exempt from IHT too. I don't imagine this is your biggest consideration right now, but I thought I'd add that in too.

If MIL doesn't have a will, her estate will be divvied up under the intestacy rules - I understand the only family MIL and FIL have is your OH, therefore anything she has will pass to him, which I imagine is what MIL and FIL want anyway. So perhaps not a major consideration, unless there are some other children who have fallen out with MIL and FIL.

So, my conclusion really is that you need to look into applying for POA through the courts asap. It's unfortunate this wasn't planned for previously, but you can't do anything about that. If you apply for POA now, there will be a higher cost and it will take time, but you should be able to get that sorted whilst FIL is mentally agile and able to witness you making provisions to look after his wife, which should be a comfort to him in this bleak time.

I do not specialise in IHT tax planning, therefore the above should by no means be construed as professional advice and I have nothing to do with the courts or care homes, but hopefully the above will help you formulate a plan of your own and/or work out which professionals you do need to hire, if any.

Again, really sorry about the situation.