Verifying lifetime gifts during the administration of an estate

theoretica

aroominyork said:

I am co-executor of an estate for which a solicitor is carrying out the administration. A number of large financial gifts were made during the deceased’s lifetime (and during the IHT taper period), with the transfers of funds carried out by the other co-executor who had financial Power of Attorney. My question is where responsibility lies for now verifying that records exist to confirm the gifts were made at the instruction of the donor? Is it with executors, with the solicitor, or does this not constitute part of the process of administering an estate?

Confirming that gifts were made on the instruction of the donor is not part of administering the estate or the duties of the executor. 

The attorney is supposed to act in the best interests of the principal/as they would themselves but there are no specific checks in place on this.  It is, of course, easiest and best for family to check if their relative is being financially abused during their lifetime - but hard if they are not open about their finances and the gifts are only revealed after death.

aroominyork

theoretica said:

aroominyork said:

I am co-executor of an estate for which a solicitor is carrying out the administration. A number of large financial gifts were made during the deceased’s lifetime (and during the IHT taper period), with the transfers of funds carried out by the other co-executor who had financial Power of Attorney. My question is where responsibility lies for now verifying that records exist to confirm the gifts were made at the instruction of the donor? Is it with executors, with the solicitor, or does this not constitute part of the process of administering an estate?

Confirming that gifts were made on the instruction of the donor is not part of administering the estate or the duties of the executor. 

The attorney is supposed to act in the best interests of the principal/as they would themselves but there are no specific checks in place on this.  It is, of course, easiest and best for family to check if their relative is being financially abused during their lifetime - but hard if they are not open about their finances and the gifts are only revealed after death.

So does that mean the solicitor - when preparing IHT paperwork for HMRC - does not have any duty to check whether the payments were made within the attorneys' authority? And the executors likewise have no such duty, and do not have the right to request evidence that the payments were authorised by the donor? If so, does that mean that if the executors have concerns about the payments their only route is to involve the Office of the Public Guardian?

Do you mind me asking, theoretica, whether you are saying this from professional knowledge, ie being a solicitor?

getmore4less

Office of public guardian don't get involved after death they no longer have any authority.
They can continue investigations already started.


Executors would have to take action against the attorney.

getmore4less

aroominyork said:

getmore4less said:

The donor should have still been checking the accounts and statements regularly.

The donor had had a stroke. He had capacity to make decisions about gifts but not to review his financial statements.

getmore4less said:

To qualify for taper they would need to be in excess of £325k the problem is gifts use up nil rate band oldest first.

You are confusing the IHT threshold with the annual gifting exemption limit.

Taper relief only applies to taxable PETs.

Any other exemptions will have already been applied.

You might want to review some guidance.

Couple of simple examples from HMRC to get you started.

https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm14611

aroominyork

getmore4less said:

aroominyork said:

getmore4less said:

The donor should have still been checking the accounts and statements regularly.

The donor had had a stroke. He had capacity to make decisions about gifts but not to review his financial statements.

getmore4less said:

To qualify for taper they would need to be in excess of £325k the problem is gifts use up nil rate band oldest first.

You are confusing the IHT threshold with the annual gifting exemption limit.

Taper relief only applies to taxable PETs.

Any other exemptions will have already been applied.

You might want to review some guidance.

Couple of simple examples from HMRC to get you started.

https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm14611

Thanks. That’s helpful but, if I read it correctly, surprising. Please confirm if I understand this, for an estate where the Will says the estate pays IHT on lifetime gifts. Example: a gift of £325k is made 7 years and 1 day before the testator’s death, so it is exempt from IHT. If the gift was made 6 years and 360 days before the testator’s death, the gift uses the full amount of the inheritance tax allowance. That means that while no IHT is due on the gift, the balance of the estate is taxed at 40% from the first Pound. The bottom line is that the tax due is the same as is for gift had been made on the day before the testator died. Is that correct?

getmore4less

That's pretty much it as I understand it.

Gifts to reduce IHT that need to be large should be thought about very carefully as they can fall foul of the way taper is applied if given over time.

Not sure what happens when there is transferable nil star band as well.

Brie

maybe the solicitor could gently ask rather than you making an issue of it??  (not that you would mean to make an issue but the same question from an independent source might not be taken as accusatory??)

BooJewels

@aroominyork said:   I need to get hold of the PoA because there was a second attorney, the donor’s accountant, and if the two attorneys had joint – rather than joint and several – powers, then the trail proving the donor’s authority should be crystal clear.

You can get some information on LPAs from the OPG - if you have the donor's DOB, full name etc.  I've done it recently to check one and was directed there by the good people in this forum.  Depending on how long it is since the death and if the LPA has been cancelled by the OPG (they cease to have authority at death, but they should be returned and cancelled after death too) I don't know if they'd still be searchable at this time.  But it would answer your joint or severally question, as that was what I needed to know on my search and did indeed get the answer a couple of days later.

https://www.gov.uk/find-someones-attorney-deputy-or-guardian

getmore4less

Had a bit of a think about the things I would consider and follow up given the limited information.

POA primary is act in best interest of the donor but that is not hard and fast as many think.

The history of the donors gifting
POA are allowed to gift but should consider the history and the finances.

eg if the donor had had made gifts to grandchildren or indicated there may be occasions they would then that can continue if it would not deplete the finances too much.

eg regular Xmas birthdays,  or single events like helping with a house purchase weddings...

Then are these gifts JUST to the attorney kids but there are other grand kids that would fall into the same group/class but have been left out  or out of what would have been the norm for the donor?.

Not sure I can reconcile the capacity to make gifts but not the capacity to check.
With partial capacity I would expect better recording of finances by attorney

There should be records to go with the financial transactions but that may not include proof of approval of a gift.

IF we are dealing with a relatively wealthy individual maybe the accountant was 2nd to manage the investing side of the wealth.

If that is the case then they probably should be involved in winding up the estate as well, so gives you a point of contact.