IHT submission and letter of intent

greenbee

In his will my dad left everything to my mother, so in theory the value of the estate for IHT purposes is £0 with the spousal exemption (and I've told her to spend the lot before she dies so I don't have to do this again...).

However, he also left a letter of intent, asking her to make various small cash gifts to individuals (including myself and my brother, and some charitable donations).

Do I include these on the IHT form (seeing as they're not mentioned in the will) or are these gifts effectively made by my mother and therefore taxable as part of her estate unless she lives more than 7 years?

I'm not sure it matters that much - it might just be easier to do the paperwork now (my dad was meticulous in his accounts) than it will be when dealing with my mother's estate (what accounts? ) whenever that happens.

getmore4less

Nothing to do with the current estate

Gifts to other than spouse(and charity) make both estates more complicated.

By leaving the current estate as is you get the full transferable nil rate band giving mothers estate £650k min before IHT kicks in

If there is a house it will rise to £1m by 2020

If mums estate is below that then IHT/7y etc may not matter.

Gifts don't become taxable within the 7 years they use up the nil rate band leaving less for the main body of the estate.

When you say small gifts they may fall into other exemptions anyway.

greenbee

Thanks - I think I worked this out while writing it out

Most of the gifts will be covered by the small gift exemption, apart from those to myself and my brother. And TBH apart from the paperwork I'm not that fussed about what happens with my mother's estate when the time comes.

I'm hoping she'll be around for another 10 years or so as long as she's fit and healthy. If she's not, there'll probably be plenty of money left and the tax man may get a bit. If she is, then I'll be encouraging her to spend

She's currently trying to get the hang of managing all the finances herself as my dad used to do it - veering between worrying about being able to afford to stay in the current house and talking about spending all the money. I know there's enough for her to live on comfortably for 15-20 years without touching the capital in the house, so if she does end up needing additional help or nursing care it can be paid for.

And I'm very glad I did this without solicitors - it has taken me less time to do than they had estimated, plus I'm not paying a percentage. I wonder whether I could persuade my brother that I should be paid half what the solicitors quoted ?

getmore4less

Lay executors can't charge...

Your mum could make a gesture with a gift since she is the one that benefits from the estate not having to pay for administration.


If amenable perhaps you(and brother) could help with the organization of her finances to keep things organised.

Keep_pedalling

You don't say how much she will be gifting to you but make sure she maximises her £3000 annual allowance so that as much gifting as possible is taken out of the 7 year rule. Assuming she made no gifts in the previous financial year she can carry over last year's allowance, and delaying part of the gift until after April 5 will take the total up to £9000 that would emmediately drop out of her estate.

Does your mother have a lasting power of attorney in place? If not that is something she really should do, and you would be wise to do the same.

greenbee

I'll just make my brother do something equally boring... Like my dad's tax return and helping my mother do hers

My dad transferred most of the bills over to my mum when he was diagnosed, and transferred money to her each month that covered them. She has more money coming in each month now - but will have more ad-hoc expenses. She doesn't do account books or spreadsheets, but we've created an A2 wall chart which lists all the budgeted things each month and she can then put the actuals next to them plus add other stuff. She can then total by line or column. It's simple enough that she can cope.

I've also asked her to keep a list of gifts in her filing cabinet so that I have a record when the time comes. I've got my dad's record of the gifts made in her name to date (which I will use to start this off).

Re. the POA - she has an old Enduring POA in place, but no copy of it. I've told her she needs to get a copy from the solicitor and we then need to decide whether it is still valid or we need to do an LPA. If so, we'll do that ourselves as well - I went to a solicitor to do mine about 18 months ago and they still don't appear to have completed it, so when I'm done with all this probate stuff I'm going to call them and tell them I don't need it anymore and do it myself.

Thanks for all the help!

Keep_pedalling

Even if the EPA is still valid I would recomend replacing it with an LPA as they are more flexible, in that they can be registered before the donor looses mental capacity.