PET query

Gers

On the back of this thread https://forums.moneysavingexpert.com/discussion/5998593/pets-iht403 I have a couple of queries which are aggravating my mind.

My DM is still alive albeit it 91 years old and in bad health.

After taking advice from her IFA (Towrey) she gifted me monies which comes under the PET rules. This was in 2012 so almost clear of the seven years.

In addition she does a transfer to me every month out of her income, no diminishing of her capital / savings. I have POA for her financial affairs, however only use those powers when requested by DM.

The other thread suggests that once the needs becomes apparent I will have to account for spending from DM's account. I got very confused so would appreciate clarification please. Should I be keeping some kind of records of HER spending? I already record the monthly transfers on my own spreadsheets.

Keep_pedalling

Yes you should keep good records if gifts from excess income are going to be claimed against her estate. You are going to have to provide income and expenditure records for up to 7 years prior to the date of death. If she does not have paper bank account statements going back to 2012, start downloading online accounts now, as there will be a limited time they will be available.

You also need to be careful about continuing these gifts if your mother looses mental capacity. As her attorney your sole responsibility is for her financial welfare, so if her expenditure increases to pay case costs for instance, then you would be unwise continue making those payment as any excess income will be reduced if not entirely wiped out.

Gers

Keep_pedalling wrote: »

Yes you should keep good records if gifts from excess income are going to be claimed against her estate. You are going to have to provide income and expenditure records for up to 7 years prior to the date of death. If she does not have paper bank account statements going back to 2012, start downloading online accounts now, as there will be a limited time they will be available.

You also need to be careful about continuing these gifts if your mother looses mental capacity. As her attorney your sole responsibility is for her financial welfare, so if her expenditure increases to pay case costs for instance, then you would be unwise continue making those payment as any excess income will be reduced if not entirely wiped out.

Many thanks for this - I assume that you mean bank records for HER account? She still receives paper statements so we have them. We also have the paperwork from Towrey from when all this was put in place.

One of the benefits of being in Scotland is that personal and nursing care at own home is free, however I take the point of costs if DM ever needs a care home. I keep the PET monies and the monthly transfers intact with this in mind. Luckily DM shows no signs of loss of cognition. Her physical health is poor, her brain is still operating on all four burners!

Cheers

Tom99

If, when the time comes, you want to claim these regular gifts were out of surplus income you will need to fill in page 8 of form IHT403, which as you can see requires quite a detailed breakdown of both income and expenditure going back up to 7 yrs.
https://www.gov.uk/government/publications/inheritance-tax-gifts-and-other-transfers-of-value-iht403

Keep_pedalling

Tom99 wrote: »

If, when the time comes, you want to claim these regular gifts were out of surplus income you will need to fill in page 8 of form IHT403, which as you can see requires quite a detailed breakdown of both income and expenditure going back up to 7 yrs.
https://www.gov.uk/government/publications/inheritance-tax-gifts-and-other-transfers-of-value-iht403

It’s worthwhile going through the older bank statements to prepaid a summery for each year in advance to avoid having to do 7 years worth in one go at a much more difficult time.

For anyone gifting this way they really should do this annually, keeping copies with their wills, to make the life of their executors easier.

Gers

Keep_pedalling wrote: »

It’s worthwhile going through the older bank statements to prepaid a summery for each year in advance to avoid having to do 7 years worth in one go at a much more difficult time.

For anyone gifting this way they really should do this annually, keeping copies with their wills, to make the life of their executors easier.

I've just begun this - so thanks again. I realised, from reading the other thread, what an enormous amount of work this would be so have got the statements out and spreadsheets almost ready.

It's a relief to get this heads up and get started. DM gave us all a fright this year and even she now realises that she's not going to get any younger. She's very pragmatic about her future and wants me to have a stress-free 'process' as possible. That's old folk for you!

Huge thanks for the advice, it's very gratefully received.

WaywardDriver

Keep_pedalling wrote: »

For anyone gifting this way they really should do this annually, keeping copies with their wills, to make the life of their executors easier.

When I looked at this I found there were 1200 transactions to categorise for 18/19 alone. So I agree with you in needing to do annually. Also while my bank statements can be downloaded for previous 7 years, for one credit card it's 12 months and for the other only 3 months. Have stopped using latter because of this.

Gers

Tom99 wrote: »

If, when the time comes, you want to claim these regular gifts were out of surplus income you will need to fill in page 8 of form IHT403, which as you can see requires quite a detailed breakdown of both income and expenditure going back up to 7 yrs.
https://www.gov.uk/government/publications/inheritance-tax-gifts-and-other-transfers-of-value-iht403

Looking at this form it asks for two things:

1. Gifts made within the 7 years before death
   
2. Gifts made as part of normal expenditure out of income

Is the initial PET gift in Oct 2012 the first one and the monthly transfers the second?

Thanks again!

Yorkshireman99

Gers wrote: »

Looking at this form it asks for two things:

1. Gifts made within the 7 years before death
   
2. Gifts made as part of normal expenditure out of income

Is the initial PET gift in Oct 2012 the first one and the monthly transfers the second?

Thanks again!

The 2012 PET remains until expiry of seven years. At that point it becomes except until the seventh anniversary.. Then it becomes totally excerpt. Gifts paid out of income are except straight away.

Gers

Yorkshireman99 wrote: »

The 2012 PET remains until expiry of seven years. At that point it becomes except until the seventh anniversary.. Then it becomes totally excerpt. Gifts paid out of income are except straight away.

Thanks - so the PET was paid in October 2012 so will be exempt later this year. Where do I show this on the form?

The gifts out of income I'm just calculating now and can see exactly where they go.

Fingers crossed I'm just being prepared! There'd be a lot of work to do when the time comes without this, though I accept that with the benefits of such gifts comes with a price, well worth paying.

Tom99

Gers wrote: »

Thanks - so the PET was paid in October 2012 so will be exempt later this year. Where do I show this on the form?

The gifts out of income I'm just calculating now and can see exactly where they go.

Fingers crossed I'm just being prepared! There'd be a lot of work to do when the time comes without this, though I accept that with the benefits of such gifts comes with a price, well worth paying.

Item 7 on page 3 of form IHT403. In Col B remember to deduct the £3,000 annual exemption and if available the £3,000 c/f from the previous year.