How to spread late Dad’s savings amongst the family?
in Deaths, funerals & probate
36 replies 2.5K views
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.
Latest MSE News and Guides
British Gas prepay meter users...
...to pay less for gas from 1 AprilMSE News
The 'odd Easter flavours' thread 2023
What bizarre food stuffs have you spied?MSE Forum
Energy Price Guarantee calculator
How much you'll likely pay from AprilMSE Tools
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) .
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.
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.
Faced with that knowledge many people may have wanted to change there Will.