Elderly parents subsidising adult sister

Tabbybea

Hi there,

My very elderly parents are sending my 50+ sister £500 each month. She’s registered disabled, with a personality disorder which among other things, means she spends compulsively, so they often get asked to bail her out. She owns her own house and on full disability benefits, has a lot of debt and subsidises her 20 y/o son who rarely works. It’s all quite screwed up, but the bottom line is that she’s vulnerable and my parents (also extremely vulnerable) feel they are doing the right thing. (I tried to argue for them to put some money or her inheritance into a trust so that she has some protection but they didn’t agree.) 

 I don’t think my folks have sought any advice and these payments are coming from their pensions and savings. I’m concerned that when they die, my sister is going to get the shock of her life because as I understand it, they’re giving her way over the threshold for inheritance tax and a large tax bill will really rock her.  Tbh though, I’m more concerned that they’ll run out of money for their own care - they seem to think they’ll go out with a bang but could easily need years of help. However it’s their money though and they are all adults. To complicate things further, another sibling lives with them and he’s not going to be able to cope alone either...!

Does anyone have any ideas or similar experiences? It’s very difficult for me not to get judgemental because I’m too close to it all.

Thank you.

thepurplepixie

Do they have capacity?  If they do I don't think there is much you can do.  If you think it is financial abuse maybe take legal advice?

xylophone

In terms of IHT, £6000 a year is covered by 2 x £3000 gift allowance.

Should either of your parents need care (and not qualify for CHC funding), while one parent remained living in their property (or offspring aged over 60 lived in their property), it could not be taken into account in the means test. 

However, the parent's own pensions/savings would be taken into account ( after pro and he or she would be required to fund that care from those assets - any gifts could then be considered deprivation of assets.

It might be as well for your parents to hold their own property as tenants-in-common (if they don't already) and for each to leave (in their wills) an interest in possession to each other with you and the brother who lives with them as remaindermen - they could leave a cash bequest in discretionary trust for the disabled daughter.

They would take qualified legal advice concerning the above.

With regard to the present situation,  would they consider setting up a joint account into which they pay a certain specified amount each month (and no more) and giving you a third party mandate?

They could then explain to your sister that she should apply to you with any requests for cash?

Grumpelstiltskin

Another angle, does your sister receive means tested benefits?
If so she is heading for disaster if she is found out as she is receiving an income she is not declaring.

Mojisola

Tabbybea said:

My very elderly parents are sending my 50+ sister £500 each month.
I’m concerned that when they die, my sister is going to get the shock of her life because as I understand it, they’re giving her way over the threshold for inheritance tax and a large tax bill will really rock her. 

As xylophone has said, the £6000 a year is covered by their annual gift allowances.  That seems very convenient - are you sure they haven't taken advice about it?

Even if they give over that amount, your sister wouldn't get a tax bill, the estate would.

As your parents are financially supporting two children, they will have a stronger claim on your parents' estates then you will and could challenge a will that left the money divided equally between their children.

Tabbybea

Thanks very much for your responses.
In no particular order:

Mum has full capacity but Dad (much older) now has dementia and although it’s not extreme yet he is apparently getting assessed soon. He always controlled the finances so this is new territory for Mum but she’s incredibly defensive so I tread carefully. I have proffered the idea of a PoA in case they both end up out of action, since they bank manually, and showed them the protection in place so they don’t think one of us is going to ransack the account!

As far as I know, Dad’s estate will go half to Mum and half to the four kids, until she dies (and obvs the house is hers until that point). That’s as of 2006 though and he doesn’t remember if it’s changed and she won’t say.

This is all complicated by the fact that I don’t have a relationship with my sister, so there’s no way Mum would give me control over her (and that’s fine by me!) I don’t need to like her to see that she needs protection. In terms of means tested benefits, from what I can tell she gets everything from a PA to extensions/solar panels... I’ve always thought she was a total fraud and many agree but no one will openly say so I gave up on that long ago. I just get accused of having no compassion!

If either parent dies, are their bank accounts inspected? I think the only way to alert my Mum to making this safer is if she thinks there will be significant financial consequences for my sister. And then get someone else to tell her! Families eh?

Mojisola

Tabbybea said:

In terms of means tested benefits, from what I can tell she gets everything from a PA to extensions/solar panels...

If either parent dies, are their bank accounts inspected? I think the only way to alert my Mum to making this safer is if she thinks there will be significant financial consequences for my sister.

The only impact on your sister would be that her means tested benefits would be stopped if she receives a lump sum from your parents' estates.

The knowledgable people on the benefits board would know whether the monthly payment is allowed or not.  I think occasional gifts are regarded differently to regular payments but check with them. 

xylophone

If either parent dies, are their bank accounts inspected? I

By whom and in what regard?

Mum has full capacity but Dad (much older) now has dementia and although it’s not extreme yet he is apparently getting assessed soon. He always controlled the finances so this is new territory for Mum but she’s incredibly defensive so I tread carefully. I have proffered the idea of a PoA 

Even if your father has dementia, this does not necessarily mean that he is incapable of granting PoA but in this situation, I would say that using a solicitor is vital.

He could grant PoA to both your mother and to you - your mother could grant it to you and perhaps your spouse/another family member.

https://www.gov.uk/power-of-attorney best to ask about granting both types.

kangoora

You don't say how much your parents assets are worth but with them both living and the potential of a transferrable Nil Rate Band plus a Housing Nil Rate Band they could potentially have £975k in assets before any inheritance tax would be due. It isn't just £325k as some people assume. If they have around or more than £1m then it would be advisable for them to speak with a step solicitor anyway.

In terms of receiving £500/month whilst being on benefits, best to ask on the benefits board. Any inheritance will almost certainly stop her entitlement to a lot of benefits.

xylophone

Any inheritance will almost certainly stop her entitlement to a lot of benefits.

Not if the will specifies a discretionary Trust.

pip895

I believe regular payments to a child given out of income would be exempt from IHT consideration anyway and not part of the £6000 joint annual allowance.  I don't think the argument Re IHT is going to hold much weight.  If/when the father needs to go into care the payments may no longer be affordable however - there would certainly be no council help with fees whilst payments continue.