Parents have asked for some help so where better than to start here

mike1976_2

Hi all,

My parents are looking at their current situation and what will be inheritence etc.

My dad is 69 and mother is 63 next month. Both are retired ... well apart from my dad who helps me with my business. I buy him the odd pie when we go out, so its labour for little reward

They own a house worth £180.

My dad also has life insurance of c.£20k. My mum has a limited life insurance policy.

Pensions are worth £41k over 3 policies. These policies have yet to be cashed in.

2 PEP ISA's = £20k

Money in current accounts c.£8k.

My dad would also inherit £20k from his mother on her death.

My parents income covers their outgoings (tax, utilities etc). Therefore the money that is in property, savings, policies outlined above is just sitting there.

The main concerns that we can see are:

a) If one of them had to go into care, then that money would soon be taken up. Is there a way of avoiding this?

b) Inheritence tax.

I have heard a 'tenancy in common' is a method to avoid both of these? Does anyone else know more about this?

They have worked 50 years each and feel they have paid enough tax and NI over the years.

My parents will be reading the posts on here and we look forward to your responses.

Many thanks in advance.

Mike

JoeK_3

The money saved up by your parents are for their benefit. Is it wrong that they use it for keeping them in a home if nothing else is available.

You parents estate is below the nil band rate, so there is no inheritence tax liability at the moment. The nil band rate is due to be increased to £300,000 soon.

JoeK

EdInvestor

They are well under the IHT threshold (300k from April) so no problem there. If one has to go into care, the council will pay as they won't take the house with the spouse in it, but they could switch to tenants in common and split other assets between them as a further safeguard.

An immediate needs annuity can also be considered if one widowed parent needs to go into care - it will usually pay the shortfall after sale of the house while still leaving a good inheritance behind.

mike1976_2

hi joek, thanks for the response. by 'they' do you mean the council or my parents. i'm refering to the first para.

to be honest, i'd hate to see them go into a home. my business would be ok if i employed someone to help me out, so i'd help out at home if need be. would i be able to have someone come and help me at home as well. just a few hours a day so i can get out and do the essentials and a bit of leisure time.

thanks ed for your link.

with tenants in common, can they do that with all assets, or does it just apply to property?

thanks again folks

mike

JoeK_3

Mike, I was referring to your parents. When I said if nothing is available, I was obviously hinting at children but it's not my position to say that.

Your parents are stiil young and unless there are health issues, they can carry on as they are indefinately.

Property can be owned as tenants on common and this can be used to pass each parents share to the beneficiaries on death and therefore relieving the burden from the other partner. Money can also be shared equally to equalise the estate ensuring that half the estate is passed on the first death.

All this can be carried out by a good solicitor through a will trust.

Regards
JoeK

mike1976_2

Hi JoeK

Thanks for the response.

I will edit this part from my mum, but she has the early stages of alzeheimer's. Long term memory is clear and concise. Her short term memory is another matter and often repeats herself.

It has been this way for a while, but of late it is notably more so.

Thanks for the advice. I just wanted to geta bit of advice before we contacted one.

My parents wanted to hand as much as legally possible over now. If I am right, the could give me £3,000 a year, each, as a gift?

As I said in the original post, my parents are looking to hand over as much as possible without being hit for tax and care fees. My dads view is that he has paid his taxes and stamp over the years. My mum worked most of her life, even when I was a child.

Depending on peoples moral standpoint, some people will be able to relate to this, while others may condone it.

EdInvestor

You don't have a problem with IHT so they can give you as much as they like.There is no need for trusts as the estates are well below the IHT threshold.

The problem is obviously likely to involve the care side. To avoid this, switch the ownership of the home to tenants in common ( you can actually do this yourself, call the Land Registry for advice, IIRC it's a matter of filling in a form).

If the PEP/ISAs are not already in separate names, open 2 new ones now and move half the money into them. Ditto the current account.

If Mum has to go to a care home, Dad will be able to stay in the family home.And if the home is owned as TIC, it is unlikely that the council will ever try to reclaim the cost of Mum's care, and certainly not in Dad's lifetime: you can't, after all, sell half a house.

Even if they did persist with a claim after his death, his half of the house would be unaffected, unless he ended up needing long term care as well.

mike1976_2

Thanks again for the reply. Much appreciated.

So we can do TIC with the Land Registry and IIRC. Who are the IIRC?

What about my Dad's pension. He has a certain lump sum which would go to my mum after his death. Alternatively, he can collect a 1/4 of that sum now and recieve £700 a year during his life, and £500 a month for my mum after his death.

If my mum went into care at a later date, after he died, then that £500 would go towards her care costs each month? I suppose the lump sum would as well? Or is there a way of avoiding this as well?

It is all if's, but's and maybe's, I know.

EdInvestor

IIRC means "If i remember correctly"

Pensions would go towards paying for care if required.A lump sum might enable self funding of care using an immediate needs annuity which caps the cost.This would provide a higher standard of care, and a measure oif independence from the council's priorities. These annuities get tax relief and are a good deal for older people, normally also enabling an inheritance to be left behind.

mike1976_2

thanks again Ed

my dad now has some questions about his pension, which he has yet to cash in.

the pension is worth £40k on his death.

it is over 3 policies.

one policy is worth £12k on his death, but would pay out £3200 as a lump sum and £700 a year while he is alive and £500 a year to my mum, should he die before my mum.

so ballpark, i would assume that he could get a £10k lumpsum now with c.£2000 a year?

he doesnt really need the money, but again doesnt want to pay tax (ok, not a problem unless the house price rockets) or the care fees?

JoeK_3

Mike, now that your mums circumtances have emerged, you need to consider arranging a Power of Attorney, whilst she is of sound mind. If that situation should change and her alzeheimer's sets in, you can then step in with an Enduring Power of Attorney (soon to be Lasting Power of attorney).

See a solicitor a.s.a.p

JoeK