Should we just stuff it in her mattress?

JethroUK

My wife's Dad died last year and he left behind a collection of antique coins

My wife's remaining Mum is not interested in the collection and wants my wife and her sister to have it (the benefit of it)

My wife and her sister already pay income tax and her Mum also pays tax on her pension entitlement and other savings

I am selling the collection and we are wondering what to do with the money

Should we just stuff it under her mattress or could it be invested in an account without being gobbled up by tax or inheritance tax?

I wondered whether I could open up an account with Mum and both sisters on the account to avoid additional inheritance taxes

bowlhead99

As I understand it the Mum has received a bunch of coins she doesn't want, right? There is no inheritance tax to pay on her receiving this from the Dad (spouse exemption).

Then, she wants to give the coins (or the proceeds from them) to her daughters. So, she is giving them a gift in 2014. There are no inheritance taxes to pay because she is not dead, and there are no income taxes to pay because it is not income, it's a present.

At some point in the future, the Mum may die. At that point, when her entire estate is reviewed, if it's worth over the 'nil rate band' of £325k (plus any of the Dad's 325k nil rate band that he didn't use by giving directly to people other than his wife), there may be some inheritance taxes to pay, out of the Mum's estate. But there is potentially has £650k of allowance to use first, before tax is a factor.

In comparing Mum's estate to the £650k allowance, if she died within 7 years of making this nice gift of coins, you would go back and take a proportion of the value of the coins and bring it into the estate value calculation. This is to avoid people giving away cash right before they die and saying it's not part of their estate for IHT. The proportion you bring into the estate depends on how long has passed since the gift. After 7 years it's nothing, after 1 year it's most of it, and there's a sliding scale in between. The size of the gift can be reduced by her annual gift allowance (£3k a year for 2014) because you are allowed to make decent-sized presents without bringing them back into the estate.

If you put the cash into a joint account for Mum and both sisters, then a third of the cash is the Mum's. It doesn't help her 'give away' the money because she's still keeping some of it. Surely if the goal is to give it away as early as possible (to prevent it being added back later if she doesn't die quick enough), you don't want to keep a third of it in her joint name. Plus, you end up having all 3 people linked together by credit reference agencies because they share bank accounts. Not usually desirable.

Stuffing cash under the mattress is poor planning as it will reduce in value over time thanks to inflation. In fact it's extremely poor planning unless you have an insurance company that is willing to pay out on whatever random amount of money you say was in the mattress when the house burns down or the burglars visit. Just sell the coins and give them to whoever the Mum wants to have them, and those people can put the cash in their own bank accounts or use it for investments.

lalman

Bowlhead99 is factually correct on every aspect. The only thing I would add is if your mother in law did die say within the 7 years, there is a tapering effect that would kick in.

Find out the value of the coins first, if she hasn't given away 3k last year, last years allowance can be brought forward (I assume this is still the rule).

Archi_Bald

Also of potential interest: http://www.ageuk.org.uk/home-and-care/care-homes/deprivation-of-assets-in-the-means-test-for-care-home-provision/

bowlhead99

lalman wrote: »

Bowlhead99 is factually correct on every aspect. The only thing I would add is if your mother in law did die say within the 7 years, there is a tapering effect that would kick in.

Yep, that's what I meant by, " The proportion you bring into the estate depends on how long has passed since the gift. After 7 years it's nothing, after 1 year it's most of it, and there's a sliding scale in between."

Find out the value of the coins first, if she hasn't given away 3k last year, last years allowance can be brought forward (I assume this is still the rule).

Yes that's entirely true, so she might have as much as 6k gift allowance to use up this year if she was less generous last year, and this part of the gift would be excluded and never go onto the clock for the 7 year taper. But I didn't mention it as quoting the whole set of HMRC rules might have been a waste of time if he was going to come back and say they are hundreds of thousands of pounds below the £650k threshold...

George_Michael

lalman wrote: »

Bowlhead99 is factually correct on every aspect.

Not quite.

bowlhead99 wrote: »

At some point in the future, the Mum may die.

I would say that it's a certainty.

atush

I would say do what you want with the coins, but dont put the money under the mattress as that is just silly.

put it in a pension, a S&S isa, a regualr savings acct, an interest paying current acct. Even premium bonds are better than the mattress.

Gogled

Taper the tax not the gift.


Taper relief is not going to be relevant unless the coins are worth at least £325,000 - assuming no other gifts.

bowlhead99

Gogled wrote: »

Taper the tax not the gift.

Sorry yes you're right on that (long time since the exams!).

If Mum passes within 7 years from the gift date, you add the value of the coins to the estate, which if they are huge might create a tax where otherwise there wasn't one; and then you can take a relief so the inheritance tax is reduced by up to 4/5ths if it was year 6-7 but not so much in earlier years.

My suspicion is we're not talking about £100k of coins otherwise we wouldn't be talking about dumping it into a joint savings account or putting it under the mattress and hoping HMRC never finds out - he would be taking professional advice.