Bequests and antemortem gifts

ursusarctos

Hello, everybody, from a newcomer to the forums.

I wonder whether anybody would be able to help me out with a family conundrum.

Here is the situation: I am trying to help my mother sort of what to do with her money in terms of bequests and antemortem gifts. Her estate will not be large. She has savings, in the forum of bank account, savings account, National Savings, and Premium Bonds to a total value of around £120,000. She owns no property (in the sense of house/land) and her personal possessions are worth very little (the odd nice piece of furniture or porcelain, but nothing worth more than a few hundred pounds). So I think that whatever she has is going to come in at comfortably below the threshold for inheritance tax.

Here is the problem: I've now spent more than half my lifetime looking after my mother, as she has been very ill/disabled for a long time. This has had a massive financial impact on me. I am in debt to the tune of coming on for £20,000 and have assets of under £1,000, and no regular source of income. I have a sibling who has not made the same sort of financial sacrifice, and has substantial savings, a good income, and prospects for a very good financial future. Therefore what my mother would like to do is to make sure that as much of her estate as possible can pass to me, but in such a way as to avoid breaking up the remaining family after her death! (To the best of my knowledge my father doesn't come into this, as my parents have never married, so, as far as I understand it, he has no claim on her estate.) The solution that we have come up with is for my mother to gift to me, during her lifetime, as much money as possible, so that on her death there will be a relatively small estate which can be divided up in terms which would be acceptable to all parties.

Please don't judge: Yes, I appreciate that this sounds underhanded, but you know what families can be like around inheritance! It seems fair to me that as I have sacrificed my career, and have ruined myself financially (I never expect to be able to buy a house or retire, if, that is, I am ever in a position to have a job), I think it is fair that I should have the chance to try to rebuild a life when my mother is finally no longer with us. Other people in the family are interested in their own gain and will happily see me get a fraction of what my mother would like me to have because they won't say, "Fair is fair", they will say, "£60,000 would be very useful, thanks".

The question: My mother is on the verge of gifting to me about one third of her current assets, so, about £40,000. The idea would be for me to invest this somewhere, e.g. savings account, Premium Bonds, etc. Then when it comes to making the will divide up the bequests as she thinks will look acceptable to other family members. What we are absolutely not doing is trying to avoid inheritance tax. If my mother's estate was going to be £1m I would be perfectly happy to pay £270,000 to HMRC. All that it is about is my mother gifting money to me so that other people can't bully me into handing it over after her death. So all I need to know is, is this legal, are there any tax implications, given that the estate is relatively small, and is there anything I should be bearing in mind or anything I have not properly thought through?

Just to provide some context, my mother is probably not going to live for years and years at this stage, so her estate is unlikely to increase much, we are unlikely to pass the 7-year period for tax eligibility for gifts, and we need to get it all wrapped up quite soon.

Thanks very much for any advice anyone can pass on.

CLAPTON

ursusarctos wrote: »

Hello, everybody, from a newcomer to the forums.

I wonder whether anybody would be able to help me out with a family conundrum.

Here is the situation: I am trying to help my mother sort of what to do with her money in terms of bequests and antemortem gifts. Her estate will not be large. She has savings, in the forum of bank account, savings account, National Savings, and Premium Bonds to a total value of around £120,000. She owns no property (in the sense of house/land) and her personal possessions are worth very little (the odd nice piece of furniture or porcelain, but nothing worth more than a few hundred pounds). So I think that whatever she has is going to come in at comfortably below the threshold for inheritance tax.

Here is the problem: I've now spent more than half my lifetime looking after my mother, as she has been very ill/disabled for a long time. This has had a massive financial impact on me. I am in debt to the tune of coming on for £20,000 and have assets of under £1,000, and no regular source of income. I have a sibling who has not made the same sort of financial sacrifice, and has substantial savings, a good income, and prospects for a very good financial future. Therefore what my mother would like to do is to make sure that as much of her estate as possible can pass to me, but in such a way as to avoid breaking up the remaining family after her death! (To the best of my knowledge my father doesn't come into this, as my parents have never married, so, as far as I understand it, he has no claim on her estate.) The solution that we have come up with is for my mother to gift to me, during her lifetime, as much money as possible, so that on her death there will be a relatively small estate which can be divided up in terms which would be acceptable to all parties.

Please don't judge: Yes, I appreciate that this sounds underhanded, but you know what families can be like around inheritance! It seems fair to me that as I have sacrificed my career, and have ruined myself financially (I never expect to be able to buy a house or retire, if, that is, I am ever in a position to have a job), I think it is fair that I should have the chance to try to rebuild a life when my mother is finally no longer with us. Other people in the family are interested in their own gain and will happily see me get a fraction of what my mother would like me to have because they won't say, "Fair is fair", they will say, "£60,000 would be very useful, thanks".

The question: My mother is on the verge of gifting to me about one third of her current assets, so, about £40,000. The idea would be for me to invest this somewhere, e.g. savings account, Premium Bonds, etc. Then when it comes to making the will divide up the bequests as she thinks will look acceptable to other family members. What we are absolutely not doing is trying to avoid inheritance tax. If my mother's estate was going to be £1m I would be perfectly happy to pay £270,000 to HMRC. All that it is about is my mother gifting money to me so that other people can't bully me into handing it over after her death. So all I need to know is, is this legal, are there any tax implications, given that the estate is relatively small, and is there anything I should be bearing in mind or anything I have not properly thought through?

Just to provide some context, my mother is probably not going to live for years and years at this stage, so her estate is unlikely to increase much, we are unlikely to pass the 7-year period for tax eligibility for gifts, and we need to get it all wrapped up quite soon.

Thanks very much for any advice anyone can pass on.

if your mother's total estate is less than 325,000 then IHT is irrelevant.

she can give you anything she wants, tax free on both sides

if she needs claims benefits or is likely to need care then there may be issue of deprivation of assets.

impossible to say about the family situation as you haven't given us any clues about who 'other members of the family ' actually are.

personally, if they way you tell the story is correct, then I would say you deserve all the money but I'm not in possession of the full picture.

Stubod

..Clapton has beaten me to it, but I agree with the comments made. Inheritance is not an issue due to being under the threshold. Therefore the biggest problem you may find does relate to deprivation of assets should your mother need to go into care, or is claiming any other "benefits". I am not sure what the time period is regarding "deprivation of assets", I think that as long as the person giving the money has no prior knowledge or expectation of going into a home or similar, then I don't think there is a specific time limit after which this money can be considered?..(although I could be wrong).
Anyhow, if you are spending a lot of your time looking after your mom, then there is nothing to stop her paying you a reasonable amount on a weekly / monthly basis...ie as a carer?

Archi_Bald

Deprivation of Assets fact sheet: 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

To prevent any family debates over the future estate, the mother needs to make a will. Sadly, a will won't prevent life-long disagreement between siblings and other family members, but at least it should make the financial position clear beyond doubt and argument. Your mother is free to leave all, or parts, of her estate to yourself, or to whoever she likes to leave her worldly belongings.

xylophone

Your mother could pay off your debts immediately?

You and she could open a joint current account with an opening deposit of £20,000 - you would both have equal rights to use the account (or not as the case may be).

The terms and conditions of a joint account should make it clear that you are joint tenants and that control of the account passes to the survivor on death. Example http://www.barclays.co.uk/Bereavement/SortingoutBarclaysaccounts/P1242633762759

"If you were a joint account holder with the deceased, you will automatically take over the account as the sole account holder. In order to make this change, all we need is the death certificate."

The money in the account should pass to you by survivorship outside any will.

(Of course this would not prevent the money in the account being taken into consideration for IHT were this a factor, which it does not appear to be in your case).

http://www.hmrc.gov.uk/inheritancetax/how-to-value-estate/joint-property.htm

She could make a will (use a solicitor) appointing you as executor- the will could leave (say) two thirds of the assets remaining at death to "my son ursusarctos in recognition of the loving care given to me during my life) and the residue to my daughter Y (or to be shared equally between my daughter Y and....)"

This would make your mother's intentions very clear and the will would thus be very difficult to challenge?

ursusarctos

Hi. Thanks very much for all these replies. I did actually write a reply before, but I'm new here and obviously didn't process it correctly. I think I was automatically logged out and it didn't post when I logged back in. Sorry for the delay in getting back.

Benefits are not an issue, as she in on DLA, which is not means tested.

We are hoping to avoid care costs in the future, though obviously that may be inevitable, depending what happens in the future. I know that care homes can cost £1,000s per week, so given that I'm not earning right now it would be cheaper to be a stay-at-home carer and inherit than to pay out £1,000s for care while doing a low-paid job.

I've looked into the debt issue. The rate of interest on the debt is actually very low, so it's one of those weird situations where it's actually more worthwhile to have money in savings gaining interest at a higher rate than the interest on the loan, as weird as that seems.

The idea of a joint bank account is a very good one, as it means that my mother still has full access to her money, and we'd have a gentlemen's agreement that I wouldn't use the account in her lifetime, but at the same time it would mean that as soon as she died I could just start using the money rather than having to go via the will.

Yes, we will get a will written with some sort of proportionate division of the estate. To be fair, this has been agreed in principle, but my mother is erring towards a distribution of, say, a ratio 5:1, whereas I think my sister is probably thinking more like 3:2! The idea is that once I am no longer caring for my mother I can try to use the lump sum to try to get back on a level with my contemporaries who have had so many extra years earning and saving. A big part of the problem is that we know how to do this legally, but we are also trying to find a way of doing it that is both legal and not likely to split the family once they find out what's in the will. I'd probably end up being a pushover and agreeing to a smaller share of the inheritance just to keep the peace!

xylophone

trying to find a way of doing it that is both legal and not likely to split the family once they find out what's in the will. I'd probably end up being a pushover and agreeing to a smaller share of the inheritance just to keep the peace!

Your mother's will should make it clear (see previous) why she is leaving more to you than to your sister - the solicitor will advise.

Newly_retired

Another point that may be relevant is that if you yourself are on means-tested benefits (JSA?) suddenly acquiring a large lunp sum could push you over the threshold of entitlement.