How to spread late Dad’s savings amongst the family?

Keep_pedalling

justwhat said:

A deed of variation is not appropriate in this situation it will just lower the amount of transferable NRB on the second death so no need for this complication.

Deed of variation in this case will mitigate care costs.  Person is in good health and currently has no need to plan for care costs. 

No it does not do that it is still gifting, the only thing a DoV does is reduce the IHT liability of the beneficiary in some circumstances and this is not one of those.

I would suggest that this is a very good time to plan for care costs even if never needed (we have them built into our long term spending model) and that planning includes how much you can gift from savings. The amount the OP is talking about certainly will not fall into DDoA territory and she could gift considerably more than that before it became a potential issue. Her house combined with income will cover over 3 years of residential care. I am not suggesting she give most of her savings away as that would be foolish, but for someone with £200k of savings and income exceeding expenditure half of that would not be unreasonable as far as DDoA is concerned.

DDoA is not an exact science but people who have get enough back to cover more than the average stay in RC are unlikely to fall into this trap.

Keep_pedalling

One other point not raised so far, is the best place for the OPs mother to keep her savings, I would suggest that cash ISAs are about the worst place to have her savings unless she is a higher rate tax payer. With zero tax being paid on the first £1000 of interest and lower interest rates than non-ISA savings accounts for most people cash ISAs are a waste of time.

Mellow_gogo

Hi again, OP here, thanks for the latest helpful comments. 

So it seems that we should not have need to consider a deed of variation because my Mum’s total assets will not come close to the IHT threshold?

We had another discussion with my Mum last night. Funny enough she suggested something similar to your point above “Keep_pedalling” - that is to transfer approx 50% of her cash savings to  my brother and I, keeping the other half herself. 

As you suggest, would this seem reasonable and shouldn’t arise suspicion at around DDOA rules, given there are currently no signs of deteriorating health? It seems this would make more sense than a regular drip feed type contribution, as has been discussed before?

Her remaining cash pile of approx £100K will gradually build again after the household jobs that I’m currently organising for her have all been sorted. I’m going to suggest that she may wish to use some of her excess income from her pensions in future to contribute to a regular fund to provide for my niece - who is currently a few years away from entering higher education. 

Yes, point taken re ISAs. And also, started the LPA application last night! 

SevenOfNine

This might help you gauge whether the Local Authority might (or not) decide there was deliberate deprivation if/when the time ever comes.

https://www.ageuk.org.uk/information-advice/care/paying-for-care/paying-for-a-care-home/deprivation-of-assets/

Care homes aside, my dementia FiLs needed homecare, 15-20 mins, AM & PM & LA made him pay £500pm, burning through his savings.

justwhat

https://www.weightmans.com/insights/deeds-of-variation-and-deprivation-of-assets/
https://www.willans.co.uk/knowledge/deeds-of-variation-when-is-it-appropriate-to-use-them/

Could i just point out using a DOV the court would have to decide it was not what the deceased person wanted AND the beneficiary was doing to avoid care home fees. 

DOV is NOT just for limiting IHT . It is also NOT automatically classed as a gift.

Keep_pedalling

justwhat said:

https://www.weightmans.com/insights/deeds-of-variation-and-deprivation-of-assets/
https://www.willans.co.uk/knowledge/deeds-of-variation-when-is-it-appropriate-to-use-them/

Could i just point out using a DOV the court would have to decide it was not what the deceased person wanted AND the beneficiary was doing to avoid care home fees. 

DOV is NOT just for limiting IHT . It is also NOT automatically classed as a gift.

I am not sure what point you are trying to make, the links you have given make it clear that a DoV will be treated the same as a simple gift if it is used to avoid future care costs or to avoid the loss of means tested benefits. Why would a court take into account the wishes of the deceased? DoVs are all about the wishes of the beneficiary making it!

There may be other reasons than IHT to use a DoV but I can’t actually think of one.

Anyway none of this applies to the OPs mother, as she has a good income and is maintaining more than enough assets to take care of foreseeable care costs.

justwhat

Keep_pedalling said:

justwhat said:

https://www.weightmans.com/insights/deeds-of-variation-and-deprivation-of-assets/
https://www.willans.co.uk/knowledge/deeds-of-variation-when-is-it-appropriate-to-use-them/

Could i just point out using a DOV the court would have to decide it was not what the deceased person wanted AND the beneficiary was doing to avoid care home fees. 

DOV is NOT just for limiting IHT . It is also NOT automatically classed as a gift.

I am not sure what point you are trying to make, the links you have given make it clear that a DoV will be treated the same as a simple gift if it is used to avoid future care costs or to avoid the loss of means tested benefits. Why would a court take into account the wishes of the deceased? DoVs are all about the wishes of the beneficiary making it!

There may be other reasons than IHT to use a DoV but I can’t actually think of one.

Firstly DoV is  also about the wishes of the deceased. Or should be. Hence also the quote below regarding  benefits held up in court. (the grandfather would not have left assets to the person on means tested benefits , if he new it would be detrimental to them)   

However  the first example is the one that would apply too the OP. (no ill health and no foreseeable health care needs = no council clawback for  care costs.)

 

Below are the 2 quotes from  each  website. 

"If a deed of variation has been entered into when care was already being received or if it was foreseeable that care might be needed in the future, then diverting inheritance elsewhere may be seen as a deliberate deprivation"

"In coming to their decision the Court of Protection concluded that the main purpose for the deed of variation was not to ensure the beneficiary kept her means-tested benefits but to effect the wishes of the testator (the beneficiary’s grandfather). It was found that the grandfather intended the beneficiary to benefit financially from his estate and if he had been aware that his gift would have removed the beneficiary’s entitlement to benefits he would have changed his Will accordingly."

macman

Gifting approx £50K each to you and your brother now would certainly be seen as gifting capital, unless her income exceeds £100k pa. However the advantage of this is that, if she lives another 7 years, then the gifting becomes irrelevant for IHT purposes. It all depends if you want to take the chance. Under taper relief, your exposure lessens year by year.
You just need to do the maths: work out how much surplus income she has p.a., divide by 24, and then set up SO's to gift that amount monthly. The actual amount is not the point-what you need to be able to demonstrate is that this gifting does not deplete her standard of living. So, you need to simply compare income and expenditure.
If the budget permits it, I would be doing both.
But, if she gifts £100k now, does this not diminish her ongoing income, or is this derived from pensions and other investments, rather than cash savings?

Keep_pedalling

justwhat said:

Keep_pedalling said:

justwhat said:

https://www.weightmans.com/insights/deeds-of-variation-and-deprivation-of-assets/
https://www.willans.co.uk/knowledge/deeds-of-variation-when-is-it-appropriate-to-use-them/

Could i just point out using a DOV the court would have to decide it was not what the deceased person wanted AND the beneficiary was doing to avoid care home fees. 

DOV is NOT just for limiting IHT . It is also NOT automatically classed as a gift.

I am not sure what point you are trying to make, the links you have given make it clear that a DoV will be treated the same as a simple gift if it is used to avoid future care costs or to avoid the loss of means tested benefits. Why would a court take into account the wishes of the deceased? DoVs are all about the wishes of the beneficiary making it!

There may be other reasons than IHT to use a DoV but I can’t actually think of one.

Firstly DoV is  also about the wishes of the deceased. Or should be. Hence also the quote below regarding  benefits held up in court. (the grandfather would not have left assets to the person on means tested benefits , if he new it would be detrimental to them)   

No, gifts can’t be controlled beyond the grave, if you are left money in a will you are free to do what you like with it whether that is by direct gifting or a DoV. 

However  the first example is the one that would apply too the OP. (no ill health and no foreseeable health care needs = no council clawback for  care costs.)

None of the cases apply to the OPs mother, she is keeping the bulk of her assets so DoA is not an issue

Below are the 2 quotes from  each  website. 

"If a deed of variation has been entered into when care was already being received or if it was foreseeable that care might be needed in the future, then diverting inheritance elsewhere may be seen as a deliberate deprivation"



"In coming to their decision the Court of Protection concluded that the main purpose for the deed of variation was not to ensure the beneficiary kept her means-tested benefits but to effect the wishes of the testator (the beneficiary’s grandfather). It was found that the grandfather intended the beneficiary to benefit financially from his estate and if he had been aware that his gift would have removed the beneficiary’s entitlement to benefits he would have changed his Will accordingly."

Again neither of those are applicable in this case or explain why you think a DoV is applicable to the OP.

Keep_pedalling

macman said:

Gifting approx £50K each to you and your brother now would certainly be seen as gifting capital, unless her income exceeds £100k pa. However the advantage of this is that, if she lives another 7 years, then the gifting becomes irrelevant for IHT purposes. It all depends if you want to take the chance. Under taper relief, your exposure lessens year by year.
You just need to do the maths: work out how much surplus income she has p.a., divide by 24, and then set up SO's to gift that amount monthly. The actual amount is not the point-what you need to be able to demonstrate is that this gifting does not deplete her standard of living. So, you need to simply compare income and expenditure.
If the budget permits it, I would be doing both.
But, if she gifts £100k now, does this not diminish her ongoing income, or is this derived from pensions and other investments, rather than cash savings?

The estate is well below IHT territory so there is no need to worry about the 7 year rule or complicate things with gifting from excess income (which requires extensive record keeping) Even if the 7 year rule was needed you don’t get taper relief on gifts under £325k and even then the relief only applies to the part of the gift exceeding that value not the whole amount.