Mum passing her inheritance straight to me - pitfalls

DiggerUK

RainbowLaura wrote: »

.......I also don't really understand how it would work if one parent went into a home whilst the other is still alive? .........

Then do as Digger Mansions has done; we have changed the house deeds from being joint tenants to tenants in common. It also requires a review of your parents wills, but the advantage is that the house is safer from seizure for care costs..._

Albermarle

I also don't really understand how it would work if one parent went into a home whilst the other is still alive? As that parent would still need the house etc. A

The house can not be sold for care home fees whilst the partner is still living in it .
In any case these issues will not apply to your parents as they will be paying their own fees anyway.

All these issues about assets, selling homes etc only affect people where the council is having to pay the bills .

Sea_Shell

How were your parents planning on dealing with all these issues if your Mum wasn't due any Inheritance?

If the money is a straight "in/out" then they are in no different position than they'd otherwise have been in. IYSWIM.

xylophone

Re Deed of Variation.

https://www.gov.uk/alter-a-will-after-a-death

Your parents are comfortably off, own their own property, are not in receipt of benefits and nor do they foresee any need for same.

The key to DoA is intention.

https://www.ms-solicitors.co.uk/community-care-law/deprivation-of-assets/

Is every gift or transfer a deprivation?
No.

Social Services sometimes make allegations of deprivation of assets which are unreasonable or inaccurate in the individual circumstances. It is quite common for Social Services to make an assumption about deprivation without considering the factors that are set out in law and guidance such as:

The length of time since the gift was made
The real intentions of the person making the gift
The nature and extent of the person’s care needs before and after they made the gift
Whether there was a pattern of gifting
The needs of the person who received the gift.

If one parent has to go into care, the home cannot be taken into account while the other lives there.

https://www.ageuk.org.uk/globalassets/age-uk/documents/factsheets/fs38_property_and_paying_for_residential_care_fcs.pdf

Your parents might wish to consider whether they would wish to own their home as tenants in common (if this is not already the case).

https://www.theguardian.com/money/2017/mar/30/as-tenants-in-common-could-we-specify-that-our-children-inherit-our-property

Malthusian

RainbowLaura wrote: »

Thanks Malthusian. I'm just concerned that if we put the 100k into a house then we would lose that house, as we wouldn't qualify for much more mortgage than we've got now on our small home.

But if your mother hadn't given you £100,000 you wouldn't have had that house, so having to sell it and move back to a smaller one to meet the LA's demand for the money falls under "losing nothing".

Ok, there's stamp duty costs and stress and suchlike, so in reality it is probably not a good idea to use funds which are liable to a deliberate deprivation claim to buy a house with, if you couldn't raise the money in some other way.

The pitfall is in using funds which could be required for a deliberate deprivation claim to buy an illiquid asset, not in the gift itself. People tend to view deliberate deprivation as some sort of penalty which it isn't.

As they don't intend on relying on the LA, the question is moot anyway.

AnotherJoe

AFAIK if it's done by a DoV then there can be no question of DOA because there was no gift given, legally the money was given by the deceased's directly to the OP.
In any case, as said, there has to be intention and the OP has mentioned no circumstances that apply to their parents that make this likely.
I would just get on with it via a DoV.

xylophone

AFAIK if it's done by a DoV then there can be no question of DOA because there was no gift given, legally the money was given by the deceased's directly to the OP.

There can be a problem with a DoV if the original beneficiary was a means tested benefits claimant.

https://www.barkerevanslaw.co.uk/2016/09/deed-of-variation-changing-a-will-after-death/

bowlhead99

AnotherJoe wrote: »

AFAIK if it's done by a DoV then there can be no question of DOA because there was no gift given, legally the money was given by the deceased's directly to the OP.

That seems quite incorrect, as with a deed of variation you are in line to receive a sum of money under the will or intestacy, and quite deliberately take action to specifically give away the rights under the will or intestacy to allow someone else to be the recipient.

This is £200k to your detriment as you have deprived yourself of an inheritance which was due to you under the law; the fact that you had the legal rights to it is pretty well-evidenced by the fact that you must sign and have it witnessed that you agree to vary the will to effectively deprive yourself of the assets which would be yours if you didn't take action to vary it.

I would agree with your other comment that they could just 'get on with it', as it doesn't seem that anybody is deliberately depriving themselves of assets with the aim of obtaining means-tested benefits to which they wouldn't otherwise be entitled.

However, the idea that there could be no deprivation judgement in other circumstances because there was no gift given is quite wrong. The person would literally be depriving themselves of an asset to which they were entitled by entering into a deed agreement to not receive it.

MumOf2

Just one more thing to consider. If there is a Deed of Variation (DoV), this reduces the amount of IHT allowance available. For example:

1. The Nil Rate Band (NRB) on date of death of first spouse was £250,000.
2. A DoV is set up by surviving spouse in favour of daughter of £200,000.
3. Surviving spouse dies when the NRB is £325,000.
4. The transferrable NRB when calculating IHT in respect of surviving spouse's estate isn't the full £325,000, rather it is £325,000 less the percentage represented by the DoV in relation to the NRB at the year of the first spouse's death (£200,000 / £250,000).
5. £200,000 is 80% of £250,000 leaving 20% available to transfer.
6. 20% of £325,000 is £65,000.
7. So the transferrable NRB is reduced from £325,000 to £65,000.

This was the case when my mother's estate was being assessed for IHT. My father died in 1986 when the NRB was £71,000 but mother executed a DoV in the sum of £40,000 in favour of two daughters for just the reasons you've outlined. This meant that we could only claim £325,000 less (£40,000 / £71,000) for residual NRB. It doesn't matter how long ago it was that the DoV was executed.

I do hope this is clear. In retrospect, mother wished she had just given us the £20,000 each rather than executing the DoV as she lived for 33 years after daddy's death and it would have fallen out of her estate as gifts are only considered if they are made within 7 years of death.

MumOf2
x

bowlhead99

MumOf2 wrote: »

Just one more thing to consider. If there is a Deed of Variation (DoV), this reduces the amount of IHT allowance available. For example:

[Snip]

In retrospect, mother wished she had just given us the £20,000 each rather than executing the DoV as she lived for 33 years after daddy's death and it would have fallen out of her estate as gifts are only considered if they are made within 7 years of death.

I'm going to make the perhaps rash assumption that Mum did not inherit it from her deceased spouse, because we were told:

... My parents are very comfortable financially, have a wonderful home that they never intend to move from, excellent pensions and say they don't need this extra money. They have therefore said they would like to pass it straight to me.

It seems that both parents are alive and well. So unless there is an uncommon situation going on where RainbowLaura's parents live together but the mother was married to some different spouse who has just died and sent her £200k, then the situation you're describing doesn't apply.

If the dad died and left the money to the mum and they're spouses of each other, the transfer is outside of inheritance tax - so in many situations it wouldn't make sense to bring it into the scope of inheritance tax by varying the will or intestacy to give it to a daughter and son. The mum could simply receive it and give it to the daughter and son herself as a potentially exempt transfer.

Whereas in OP's situation, the mum has received the money from someone who isn't her spouse (assuming alive-and-well Dad is likely to be her spouse), so it is already in the scope of IHT, so there isn't really a downside to vary the bequest and divert it to the OP and her brother.