How to spread late Dad’s savings amongst the family? 18 August 2022 at 2:03AM in Deaths, funerals & probate 36 replies 2.5K views

Mellow_gogo

My Dad passed away late last year. Since then my brother and I have been ensuring that all accounts are solely in my Mum’s name - this amounts to £220,000 - 70/30 in cash and cash ISAs. Her house is also worth approx £250,000.

At 83 and currently in good health she now receives a widow’s pension alongside her state pension, which more then meets her monthly outgoings. We’re now arranging with her to get various household jobs done - downstairs loo, new driveway, new windows etc. to make things as comfortable as possible for her.  These jobs will only eat into a tiny portion of her savings. She is aware of this and wants to start to utilise some of the remainder amongst my brother and I whilst she is still here to witness the benefits of doing so.  

But how best should we do this? We’ve already utilised the 3k annual gifting allowance. My Mum wants to basically start contributing lump sums of approx 5K for each of us towards funds for e.g. a newer car, new bathroom, extension etc.  Is this approach advisable? 

I’ve read that setting up a regular contribution is an acceptable way of a parent providing money over time to children, as long as the amounts given away don’t  detrimentally affect their own lifestyle. 

In this situation is this the most prudent way for my Mum to ‘make gifts’ out of her ‘surplus income’. If she were to set up a regular contribution to both my brother and I, each totalling e.g. approx £10k per year, would that make sense?  Would that make these payments exempt from the 7 year IHT ‘taper relief’?  Or should she simply withdraw regular chunks of cash and distribute it that way?

We also know that care home fees could come into the equation at any point, and there is a feeling that we are at a critical point just now but must move forward in the right way. 

As a still grieving family we just want to make sure that as much as possible my Dad’s life savings are used now, as he would have wanted them to be - spread amongst those he loved.

I’d be very grateful for any views or opinions on how best we should move forward. 

justwhat

Sorry for your loss..

If your dad died less than 2 years ago then look up "deed of variation". It may depend on the Will and if you got probate.

Also you and  your mum need to decide if you  want to keep money back for a care home fee's. Or if you are going to get rid of savings without consideration of the care home fees.

You are not allowed to avoid care home fees but you don't have to plan for them, if you are in good health.

Once all above is sorted/savings diminished. Going forward any excess monthly income/money  can be given away provided it does not lower your mums standard of living. (there are some rules) .

p00hsticks

Mellow_gogo said:

In this situation is this the most prudent way for my Mum to ‘make gifts’ out of her ‘surplus income’. If she were to set up a regular contribution to both my brother and I, each totalling e.g. approx £10k per year, would that make sense?  Would that make these payments exempt from the 7 year IHT ‘taper relief’?  Or should she simply withdraw regular chunks of cash and distribute it that way?

Sorry for your loss.

I'm not an expert but my understanding is that 'surplus income' is any amount over and above what she needs to live on from (in this case) her state pension and widows pension, and any interest she's getting from her savings, not depleting the savings themselves. Can she really spare £10k a year from that ?

pjcox2005

Were your parents married, if so and all your dad's possessions were passed to your mum then he may not have used his nil rate allowance.

Transferring unused basic threshold for Inheritance Tax - GOV.UK (www.gov.uk)

Look into whether his allowance transfers to your mum, as if it does that would mean the value of her estate would need to be £750k before inheritance tax kicks in. Given house £250k, cash £220k and presumably her own savings she's still likely to be below the allowance.

She can then give gifts however she wants, and even if she dies within 7 years of the gift then no IHT would arise as it would be within her extended personal allowance.

Should state i'm not an IHT expert so you need others to confirm and/or look into it, but that would be my starting point and then leave your mum to decide on giving cash as and when she wants without worry.


Edited to add - if a cash gift is covered by an exemption (e.g. 3k allowance) then it becomes a potentially exempt transfer so if she survives 7 years it falls out of her estate for IHT, and if not then it comes into the calculation but the personal allowance can be applied against it.

elsien

If your dad wanted his savings to be spread among those he loved, then did he not ensure that those wishes were put in his will? 

As you mum is 83, how is her health and why are you at a critical point with regards to care home fees? Although many people manage at home and don’t need to go into a care home, mum may still need to pay for care at home at some point. Aside from any issues around deliberate deprivation of assets which you need to read up about if you haven’t already, money gives her choices. Don’t underestimate the importance of that if she can be supported to stay at home with paid care. 

kipsterno1

Has your mother got LPA's in place? If not I would be looking at sorting this ASAP, both financial and health. It is a very straight forward process that can be done online without the need of a solicitor. 

msb1234

I would say that your mum should make sure that she gives someone Power of Attorney asap to make sure that if she needs it, someone can act on her behalf in the future. For example, she may need to sell her home to pay for care home fees at some point down the line. 

In my area, a decent care home costs around £4K a month - so £48k a year. At that rate, her home would pay for around 5 years worth of care home fees. 

As has already been said, if the will hasn’t gone through probate you can apply for a deed of variation to pass money onto you and your brother now. If it has, then I’d find a decent financial advisor to give her appropriate advice. It will be money well spent.

Keep_pedalling

Assuming your parents were married you mother’s estate would need to be in excess of £900k before IHT became an issue (2x NRB + one and a bit residential NRB). Forget about gifts from excess income that is for people who actually have an IHT liability within the estate. A deed of variation would be a pointless complication and in any case provides no tax advantages when passing an inheritance from a spouse to someone else. The annual £3000 exemption is also rather pointless consideration where the estate is way off IHT territory. 

As she has a house with significant value and a lot of cash then I think the better option would be one off gifts. As long as she keeps a good amount of the cash to cover off things like major house relate or adaptions then this should not affect her long term security and because she also has a house to cover care fees it would not be considered deprivation of assets. 

Even if your parents weren’t married her estate is still well below her IHT exemptions (£500k) so all the above still applies although it might be worth doing a deed of variation instead of a simple gift.

74jax

Mellow_gogo said:

My Dad passed away late last year. Since then my brother and I have been ensuring that all accounts are solely in my Mum’s name - this amounts to £220,000 - 70/30 in cash and cash ISAs. Her house is also worth approx £250,000.

At 83 and currently in good health she now receives a widow’s pension alongside her state pension, which more then meets her monthly outgoings. We’re now arranging with her to get various household jobs done - downstairs loo, new driveway, new windows etc. to make things as comfortable as possible for her.  These jobs will only eat into a tiny portion of her savings. She is aware of this and wants to start to utilise some of the remainder amongst my brother and I whilst she is still here to witness the benefits of doing so.  

But how best should we do this? We’ve already utilised the 3k annual gifting allowance. My Mum wants to basically start contributing lump sums of approx 5K for each of us towards funds for e.g. a newer car, new bathroom, extension etc.  Is this approach advisable? 

I’ve read that setting up a regular contribution is an acceptable way of a parent providing money over time to children, as long as the amounts given away don’t  detrimentally affect their own lifestyle. 

In this situation is this the most prudent way for my Mum to ‘make gifts’ out of her ‘surplus income’. If she were to set up a regular contribution to both my brother and I, each totalling e.g. approx £10k per year, would that make sense?  Would that make these payments exempt from the 7 year IHT ‘taper relief’?  Or should she simply withdraw regular chunks of cash and distribute it that way?

We also know that care home fees could come into the equation at any point, and there is a feeling that we are at a critical point just now but must move forward in the right way. 

As a still grieving family we just want to make sure that as much as possible my Dad’s life savings are used now, as he would have wanted them to be - spread amongst those he loved.

I’d be very grateful for any views or opinions on how best we should move forward. 

I'm confused. If this was what he wanted, this was in the Will right? So why did it all go to his wife? 
Who was the Executor and was the Will followed? If so, then what do you mean about spreading out as your dad wanted (he didn't as the Will started what he wanted to happen)? And if not, you need to go back to the Executor and point out they need to follow his Will. Make sure they do.

What you are suggesting, especially saying your mum could soon be at crisis is a very bad idea unless your mum gifts the money, you do nothing with it and then use it to pay for care, so it comes out of your account rather than hers.  But to be honest I'd just leave it with her. 
Make sure you have PoA set up, but do check the Will was followed correctly. 

justwhat

74jax said:

I'm confused. If this was what he wanted, this was in the Will right? So why did it all go to his wife? 
Who was the Executor and was the Will followed? If so, then what do you mean about spreading out as your dad wanted (he didn't as the Will started what he wanted to happen)? And if not, you need to go back to the Executor and point out they need to follow his Will. Make sure they do.

What you are suggesting, especially saying your mum could soon be at crisis is a very bad idea unless your mum gifts the money, you do nothing with it and then use it to pay for care, so it comes out of your account rather than hers.  But to be honest I'd just leave it with her. 
Make sure you have PoA set up, but do check the Will was followed correctly. 

Many people make Will's  without consideration of IHT and/or care cost's.  Some people would just prefer the council too pay as that is what happens if you do not  have any savings.

Faced with that knowledge many people may have wanted to change there Will. 

Mojisola

74jax said:

I'm confused. If this was what he wanted, this was in the Will right? So why did it all go to his wife? 
Who was the Executor and was the Will followed? If so, then what do you mean about spreading out as your dad wanted (he didn't as the Will started what he wanted to happen)?

Dad left his estate to Mum.

Mum wants to share some of the capital with their offspring. 

If the offspring want to spend it in ways that they know Dad would approve off, all to the good.

It's irrelevant that Dad didn't spread the money around the family in his will.