Tax question

zygurat789

CLAPTON wrote: »

No it doesn't

the government guarantee is 85,000 per financial institution

so you could have 85k in Lloyds
85k in Barclays
85k in HSBC
85k in Nationwide
85K in norwich and peterboorough

so thats 450,000 (???) not to mention RBS, Coventry, Yorshire BS, Virgin etc etc

we need the full facts to advise

No it's only one lot of £85,000 for these two.

http://www.moneysavingexpert.com/savings/safe-savings

xylophone

The cash and shares have been left to my mum but she doesnt want them to be taken if she goes into care.

See post 10 above.

Don't confuse IHT /Potentially Exempt Transfer (7 year rule) with possible LA view of Deprivation of Capital.

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

http://www.ageuk.org.uk/Documents/EN-GB/Factsheets/FS40_deprivation_of_assets_in_the_means_test_for_care_home_provision_fcs.pdf?dtrk=true

And with regard to IHT, see http://www.hmrc.gov.uk/inheritancetax/intro/transfer-threshold.htm

Banger696

Thanks Xylo, the age UK factsheet gives a lot of details and mentions six months under the powers of recovery of an asset, my solicitor mentioned 2-3 years so maybe she was getting mixed up with IHT requirements. I need to do a lot more reading on the Age UK site and Tax site. I understand pretty much the IHT consequences but was unaware of the possible transfer of allowances. At present I am caring for my mum and she is also looking after me.

Savvy_Sue

I think your situation is complicated ...

Banger696 wrote: »

I am 46

OK: I think that if you were over 60 then the house would be 'disregarded' for any calculations of how much your mum needed to contribute to her care as long as you were still living in it. Something to check up on: that disregard may also apply if another resident is disabled, as in your case.

Banger696 wrote: »

Just to mention I am also receiving Incapacity Benefit and DLA and currently being reassessed for ESA which Incapacity benefit is contribution based.

DLA is not income based, but while IB may be contribution based, will it continue to be contribution based, or will you be transferred to something income based in the future? I don't understand the different kinds of ESA, so this is something you need to check out. I believe that owning half a house WILL affect income based benefits.

Banger696 wrote: »

The first post is wrong, my mum already owns half the property and I have to assent to my dad's half for which my solicitor is arranging.

As for the benefits currently they are contribution based and the DWP adviser told me they wouldnt affect my IB or ESA and I quote "we dont need to know about that as it is contribution based".

The cash and shares have been left to my mum but she doesnt want them to be taken if she goes into care. So she is gifting a portion to me for me to look after her and the house. The solicitor mentioned 2-3 years for the LA not to take the gift into account for care but officially it is 7 years. Solicitor also felt the house as it was in joint names couldnt be sold as I am living in it. I am assuming I have remembered this correctly and it is right.

The difficulty is that if either of you need any assistance which is based on income / assets, that money comes into the equation. So, your mother giving it to you could cause you problems, and your mother having it could cause her problems.

Having said that, if it were my mother I'd encourage her to hang onto her assets, because while it may mean she has to pay if she needs residential care, it also means she'll get a lot more choice! If the LA are paying, it's what they're prepared to pay for.

Banger696 wrote: »

Thanks Xylo, the age UK factsheet gives a lot of details and mentions six months under the powers of recovery of an asset, my solicitor mentioned 2-3 years so maybe she was getting mixed up with IHT requirements. I need to do a lot more reading on the Age UK site and Tax site. I understand pretty much the IHT consequences but was unaware of the possible transfer of allowances. At present I am caring for my mum and she is also looking after me.

While I wouldn't recommend doing anything too hasty, between you it might be a good idea to do a bit of future-proofing. Is the house suitable / convenient / easy to maintain? Are there adaptations which would make life easier for both of you? If these would be very difficult or expensive, is it worth thinking about a move in the not too distant future?

A lot to think about: be kind to yourselves and take it slowly, there's rarely a need to rush these things ...

Banger696

Thanks Sue but if the house is sold then its effectively an open market by the LA as an assest. As I am incapacitated by way of mental health and heart failure I would hope my ESA would remain contribution based but if not then I would live off the money my dad has left this is why a gift is needed.

My mum has two pensions, the state pension and widows LGO pension which the LA would use. These are reasonable pensions so should keep her in good stead but she is adamant she wont go into residential care but I am working on the assumption you can never know.

Where would I check out the difference between contribution based ESA and income based can you point me in the right direction Sue?

Savvy_Sue

Banger696 wrote: »

Thanks Sue but if the house is sold then its effectively an open market by the LA as an assest. As I am incapacitated by way of mental health and heart failure I would hope my ESA would remain contribution based but if not then I would live off the money my dad has left this is why a gift is needed.

As far as I know, if you and your mum jointly own a house it doesn't matter if it's the one you're currently living in, or a different one you buy together. Also, again AFIAK, any money spent now on adaptations to 'future-proof' it shouldn't be regarded as deprivation of assets.

Banger696 wrote: »

My mum has two pensions, the state pension and widows LGO pension which the LA would use. These are reasonable pensions so should keep her in good stead but she is adamant she wont go into residential care but I am working on the assumption you can never know.

On one level your mum is right: I'm sure that being determined to stay in your own home plays a key part in staying in your own home ... Also it's only a small % who ever need to go into residential care. So again, IMO, she should hang onto the money and use it to remain independent - the adaptations as I've suggested, plus buying in care at home as required. She may feel strongly about that as well, but if, for example, getting a cleaner in means that you and she have more energy for more enjoyable things, then getting a cleaner in seems to me to be the way to go. If changing the sheets and doing the ironing is a massive drain on energy, then someone to do that is a worthwhile use of the money.

Banger696 wrote: »

Where would I check out the difference between contribution based ESA and income based can you point me in the right direction Sue?

The very very basic guide is here.

jimmo

I started writing this after Sue posted at #15 but before you replied at #16 and now see that things have moved on but I am posting as it is but please read it in that context.

　

It is important to remember that you now own half the house and your mum owns the other half. Your half share did not come from your mum; it came from your dad so there is no way that your mum deprived herself of anything.

In those circumstances and if your mum has to go into care I don’t believe that the local authority can use the value of your mum’s half share in any calculations but, even if they could what is her half share worth on the open market?

In your own circumstances that question becomes “How much would anybody be prepared to pay for a half share interest in a property which has a 46yo sitting tenant who pays no rent and cannot be evicted?”

My bet would be “Not very much.” but you may want to think about that.

I would therefore ignore the house completely for now.

As regards the savings of 115k that your dad left to your mum one possibility is a deed of variation (to your dad’s will) to give the effect that your dad actually left half of the savings to you and half to your mum. However, as the original beneficiary, your mum would have to make the deed of variation. I suspect that would fall foul of the deliberate deprivation rules but it may be worth checking on.

On the other hand that would make you the owner of savings of 57.5k.

In post #1 you say that your mum wants to give you the 115k on trust to look after her and the house. She can either give you the money and rely on your integrity to do the right thing with it or she can give the money to a trust with instructions as to how the trust monies are to be used. The only other alternative I know of is for her to keep the money herself.

If she gives her money away, regardless of whether it is to you personally or to a trust, that will be subject to scrutiny as deprivation of assets if she has to go into care.

As regards going into care, I’m with Savvy Sue. My mum is now 91 and she currently lives independently in her own flat. If she has to go into care the freedom to chose a place she actually likes will be worth every penny compared to the sort of places the local authority could dump her in.

With regard to yourself, contributions based ESA lasts for 1 year. After that you will be on income based and any savings you have will matter.

Banger696

With regard to yourself, contributions based ESA lasts for 1 year. After that you will be on income based and any savings you have will matter.

I think that is correct for the Work Group but as far as I know the Support Group, which I should be in is ongoing.

See here

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/181603/esa-changes-q-and-a.pdf

Savvy_Sue

Banger696 wrote: »

I think that is correct for the Work Group but as far as I know the Support Group, which I should be in is ongoing.

Just to say that there's 'should be' and 'what actually happens' ... Of course, in the short term at least, you could use your inheritance to say "thanks but no thanks" to benefits which require you to jump through hoops and dance a little jig!

getmore4less

Banger696 wrote: »

My dad has recently passed away and me and my mum are executors and in his will he leaves half our property to me and the other half to my mum. He also has left savings of 115k to her which she wants to give to me as a gift on trust so I can look after her and the house. Are there any tax implications in this? She also has a will which is a mirror image of my dads leaving remaining sums to me. Any ideas?

that would be a
Gift with reservation. (this could be avoided with a deed of variation)
Deprivation of assets.


If as you say later the house is worth around £400k and if this £115k is the total of the estate then there would be no IHT anyway as 2 nil rate bands currently give £650k.

If your mother has other assets it might be worth a review and check her current IHT liability her nill rate band will be around £450k

When was the will written since the change to transferable nill rate bands there is limited IHT benefit transferring assets, but still a benefit for care fees.

You also need to review your will.