Power of Attorney / IHT planning

LukeSkywalker8

I would like to understand if there are any options to reduce IHT. My Father in law is in a care home suffering from Alzheimer's. The income he gets from Pension & Share dividends each month significantly exceed the cost of the care home and his few expenses. My sister in law is Power of Attorney and does not believe anything can be done to reduce IHT. His assets (Shares and Investments) continue to grow. Currently with over £2m the IHT is likely to be c.£750k. I know there are lots of rules about gifting as a PoA but my father in law will never need the majority of this money and even if something happens soon the IHT can be paid back but if he lasts longer than 3 years I understand the 40% starts to drop.

Any advise or pointers welcome

Keep_pedalling

No, it is far to late to do anything about IHT. Your SIL is entirely correct she cannot make gifts on his behalf.

About the only thing that can be done is to buy him the best care he can possibly get.

Linton

You can only carry out IHT avoidance under PoA with the approval of the Court of Protection. See https://www.clapham-collinge.co.uk/news/court-of-protection-limits-iht-planning.

tacpot12

Linton's post suggests that a prompt application to the court of protection might allow some IHT planning, but the court will take a very cautious approach, so you need some expert advice on how to calculate the maximum amount your father in law could possibly need.

Tom99

LukeSkywalker8 wrote: »

I would like to understand if there are any options to reduce IHT. My Father in law is in a care home suffering from Alzheimer's. The income he gets from Pension & Share dividends each month significantly exceed the cost of the care home and his few expenses. My sister in law is Power of Attorney and does not believe anything can be done to reduce IHT. His assets (Shares and Investments) continue to grow. Currently with over £2m the IHT is likely to be c.£750k. I know there are lots of rules about gifting as a PoA but my father in law will never need the majority of this money and even if something happens soon the IHT can be paid back but if he lasts longer than 3 years I understand the 40% starts to drop.

Any advise or pointers welcome

Did your FIL inherit his spouse's unused nil rate band? What about the residential nil rate band, did your FIL sell his property on or after 8th July 2015?

getmore4less

LukeSkywalker8 wrote: »

I would like to understand if there are any options to reduce IHT. My Father in law is in a care home suffering from Alzheimer's. The income he gets from Pension & Share dividends each month significantly exceed the cost of the care home and his few expenses. My sister in law is Power of Attorney and does not believe anything can be done to reduce IHT. His assets (Shares and Investments) continue to grow. Currently with over £2m the IHT is likely to be c.£750k. I know there are lots of rules about gifting as a PoA but my father in law will never need the majority of this money and even if something happens soon the IHT can be paid back but if he lasts longer than 3 years I understand the 40% starts to drop.

Any advise or pointers welcome

Tom99 wrote: »

Did your FIL inherit his spouse's unused nil rate band? What about the residential nil rate band, did your FIL sell his property on or after 8th July 2015?

https://www.gov.uk/guidance/inheritance-tax-residence-nil-rate-band#tap-away

getmore4less

Linton wrote: »

You can only carry out IHT avoidance under PoA with the approval of the Court of Protection. See https://www.clapham-collinge.co.uk/news/court-of-protection-limits-iht-planning.

In the article quoted there is this line

In the case of Re PC (2014) concerns were brought to the Office of the Public Guardian's attention anonymously about the conduct of a lady's 2 attorneys

What may not be obvious is that the office of the public guardian powers are are only investigatory, that means that for those hold LPA they only get involved if there is a complaint.

Where OPG appoint deputies the powers extend to monitoring the deputy.

https://www.gov.uk/guidance/how-we-deal-with-safeguarding-concerns



If not already done this is the main guidance

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/497253/Mental-capacity-act-code-of-practice.pdf

LukeSkywalker8

Thanks all for the responses, so reading some of them it is worse than I thought. He is divorced so no unused nil rate band, his house was sold after 2016. So if I am reading correctly, he also loses the £175k nil rate band (post April 2020) as his assets are worth well over £2m so the government will take 40% of everything over £325k and nothing can be done to stop any IHT

tacpot12

Are any of his assets held in pensions? If so, they might already be written in trust. You could check with the trustees/scheme administrators if you are not sure.

Tom99

LukeSkywalker8 wrote: »

Thanks all for the responses, so reading some of them it is worse than I thought. He is divorced so no unused nil rate band, his house was sold after 2016. So if I am reading correctly, he also loses the £175k nil rate band (post April 2020) as his assets are worth well over £2m so the government will take 40% of everything over £325k and nothing can be done to stop any IHT

I think the lost RNRB is phased in, £1 lost for every £2 over £2m so £2.35m would be needed to totally lose the RNRB also since he downsized in 2016, before the RNRB was introduced in 2017, I think the RNRB is restricted to £100k if the sale was on or after 8th July 2015 and before 6th April 2017, so £2.2m would be the upper limit.

Dox

How old is he? Do you know what sort of pension income he is receiving - presumably it is a regular payment from either a defined benefit (aka final salary) scheme, or an annuity bought if he had a defined contribution pension savings 'pot'? Do you know when his pension first came into payment?