Does this seem all right?

itsanne

I may have answered my own question!

"If there is no evidence to the contrary, we consider that income becomes capital after a period of two years."

and

"If a gift is made out of a current account you only need to check that the gift could have been made out of income. You do not need to match the gift to specific money in the account."

These are from HMRC's own guidelines: http://www.hmrc.gov.uk/manuals/ihtmanual/ihtm14250.htm

Presumably that means she's okay continuing as she does as all gifts are now from her current account and also show the recipient?

Gers

itsanne wrote: »

Thanks Gers, but I don't think it applies as she's below the threshhold for inheritance tax.

Please someone correct me if I'm wrong.

It's amazing how quickly IHT can become an issue. And it does no harm either in case the mother needs some additional care support. The longer the gifting takes place the more unable it can be seen as deprivation of assets.

Mojisola wrote: »

You don't need to worry about it if she won't be paying IHT but it would be worth documenting gifts from the DOC aspect, especially as you have POA. Think of it as protecting yourself and your brother from any complaints in the future.

Another useful and valid point. I have POA for my mother but have not yet had to use it, however need to protect myself from abuse of power claims. And HMRC will want some evidence too in the future.

Gers

itsanne wrote: »

Would money gifted have to be every month to prevent her current account building up or could she wait until it reaches a set amount and then give it out as she currently does?

Even though it's what she ends up doing anyway, I don't really like the idea of suggesting she should be giving the money away, especially as it looks as if deprivation of assets wouldn't be a problem. Although I have LPoA, I normally only use it for her convenience, and the only suggestions I make are to save her money or persuade her to spend it on herself. However, I will discuss this with her as she wants to talk to me about the money building in her account again. She certainly would not want my brother or me to have problems in the future.

It's best to be done regularly - my mother's IFA recommended a monthly payment as he did an audit of her spending over the previous 12 months and identified that she could gift me £x per month and still have enough to support her normal lifestyle.

Again, HMRC would look more favourably on this type of regular payment, however, remember that your mother is also allowed to gift £3,000.00 to as many people as she wants (once per person per tax year I believe) again without any tax liability and without any notion of deprivation of assets looming their ugly heads.

Additionally your mother can give any amount of money (including capital) away without any tax liability. Look up Potential Exempt Tax gift.

I am no expert - this is my personal experience talking, however my mother did take the advice of her expert! Once the monies are gifted they are the sole property of the recipient and s/he can spend/use/give away/save the funds anyway they want. The donor has no say over this.

I wish you luck with this, it all seems complicated at first but is actually very easy. Just ensure that a clear transparent trail can be evidenced for when the time comes. HMRC and banks love trails.

:beer:

pollypenny

How nice to read OP's open and honest query. What a change from those who want the rest of us to pay for their parents' care.

OP, everything you have outlined sounds good. Hope you mum continues to do well for years.

Mojisola

Gers wrote: »

Again, HMRC would look more favourably on this type of regular payment, however, remember that your mother is also allowed to gift £3,000.00 to as many people as she wants (once per person per tax year I believe) again without any tax liability and without any notion of deprivation of assets looming their ugly heads.

If you're thinking of avoiding IHT, then it's just one £3000 per year - not lots of £3000 to different people.

itsanne

Gers wrote: »

your mother is also allowed to gift £3,000.00 to as many people as she wants (once per person per tax year I believe) again without any tax liability and without any notion of deprivation of assets looming their ugly heads.

Gers, I really appreciate your attempt to be helpful. I'd like to return the favour and prevent you running into trouble over an error.

http://www.hmrc.gov.uk/inheritancetax/pass-money-property/exempt-gifts.htm

"You can give away gifts worth up to £3,000 in total in each tax year"

It doesn't affect me as we won't run into IHT, but you are clearly trying to arrange things with that in mind, so a brief look at that link might be useful.

Gers

itsanne wrote: »

Gers, I really appreciate your attempt to be helpful. I'd like to return the favour and prevent you running into trouble over an error.

http://www.hmrc.gov.uk/inheritancetax/pass-money-property/exempt-gifts.htm

"You can give away gifts worth up to £3,000 in total in each tax year"

It doesn't affect me as we won't run into IHT, but you are clearly trying to arrange things with that in mind, so a brief look at that link might be useful.

Thanks! As I am now an only child (?) I am the only recipient of this exempt gift, which is why I said to ask an expert.

My mother is trying to arrange her financial affairs as she has worried for a number of years about the IHT implications. No matter how often I urged her to leave that to me when the time comes she insisted on doing things this way. She is now at peace with herself that her affairs are in order and is now worrying about something else instead. As she's in her late 80s I think she's entitled to her peace of mind. There is no hint of any illness or diseases, apart from being a little deaf she is hale, hearty and of very sound mind. Can't see a care home being necessary! Fingers crossed. So we are not making any efforts to avoid charges either.

Good luck with your mother and her affairs, I hope it all turns out the way she wants.

Gers

Mojisola wrote: »

If you're thinking of avoiding IHT, then it's just one £3000 per year - not lots of £3000 to different people.

Thanks too!

Savvy_Sue

Gers wrote: »

without any notion of deprivation of assets looming their ugly heads.

I am not so sure about this either: I think if you were borderline for needing to pay for your own care and gave away £3000 it would look very like DofA.

I think too for the OP that whether or not the gifts are monthly, if you're ever in a position where you HAVE to take over as your mother's attorney, you need to be able to demonstrate what her habits / pattern / intentions were before she lost capacity. So, if mother's always given all the grandchildren £50 for Christmas and birthday, there would be no question about continuing to do this.

I think some documentation of whatever gifts your mother makes would be helpful!

itsanne

Savvy_Sue wrote: »

I think too for the OP that whether or not the gifts are monthly, if you're ever in a position where you HAVE to take over as your mother's attorney, you need to be able to demonstrate what her habits / pattern / intentions were before she lost capacity. So, if mother's always given all the grandchildren £50 for Christmas and birthday, there would be no question about continuing to do this.

I think some documentation of whatever gifts your mother makes would be helpful!

That sounds sensible. Wouldn't bank statements showing cheques given to grandchildren etc cover it? (You'll gather my heart sinks at the prospect of having to record everything separately - there will shortly be 20 between children and spouses, grandchildren and great grandchildren!) Birthdays and Christmas have always been generously treated and grandchildren frequently given "extra pocket money".