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

justwhat

Keep_pedalling said:

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.

If you can help it you do not want money to be seen as gifting. "gifting" at certain thresholds is liable for IHT and care home fee clawback.

DOV is not necessary gifting , its only if you trigger certain things. Have a DOV avoids the 7 year rule.  Its not classed as gifting legally that's why it avoids IHT.

If in good health with no expectation of care fees DOV will avoid 7 year rule or council clawback. Much cleaner and simpler if "gifting" large amounts of money to use DOV.(DOV is NOT the exact same as gifting ,as it is varying a Will). 

The original OP has not explained care cost planning.
9ill leave this now as i think the OP has the answers they require)

Keep_pedalling

justwhat said:

Keep_pedalling said:

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.

If you can help it you do not want money to be seen as gifting. "gifting" at certain thresholds is liable for IHT and care home fee clawback.

DOV is not necessary gifting , its only if you trigger certain things. Have a DOV avoids the 7 year rule.  Its not classed as gifting legally that's why it avoids IHT.

A DoV may not be treated as gifting for IHT purposes, but is still gifting and is treated as such for DDOA, which is clearly stated in the links you provided so I am still puzzled why you think it gives any other advantage, but this thread has got diverted rather so I will say no more on the subject.

Secret2ndAccount

If the father did not give any gifts or bequests, his IHT nil rate band would pass to his wife. Therefore, the mother now has a 650k NRB. If she gifts the 100k, she is left with 550k of her NRB, (not considering the family home, and additional NRB).
If a DoV is used, then the father gives 100k to the children. This comes out of his NRB, so he only passes 225k to the mother. Her NRB is therefore 550k. Therefore, the DoV achieves nothing.
In fact, the DoV achieves less than nothing. If the father gives the 100k, the NRB is lost forever. If the mother gifts the money, then her NRB potentially goes all the way back to 650k after 7 years. Unlikely to matter in this case as the estate seems small enough to escape IHT, but could be relevant to others: It is better NOT to use DoV.

I agree that the gift of 100k does not constitute deprivation of assets given the circumstances. It is possible that a council might not agree. Once again, the DoV would not help. The mother is passing money to the children rather than keeping it for herself. Either that is DDOA or it isn't. Whether it is by gift or by DoV does not change this.

Mellow_gogo

Thanks all for your contributions in helping me to understand what is it undoubtedly a complicated area. 

It seems we won’t have to worry about going over IHT thresholds, but there is a lot that is potentially open to interpretation it seems, as far is DDOA is concerned - concerning both lump sum or regular contributions. 

getmore4less

A DOV is a gift with some tax benefits(IHT & CGT).

I would look at it this way(with you meaning both siblings),

Give you the money, you and she get to see the benefits  everyone happy.

Deal with any DOA issues if they ever happen, with the income and decent savings and a house to sell  there will be time to plan.

Worst case you dig into your pockets and top up if needed.

getmore4less

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)   

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."

you missed of the important part of the latter.

It is also worth noting that the Court of Protection does not have any jurisdiction to determine the beneficiary’s entitlement to means-tested benefits. However, in LMS Re [2020] EWCOP 52, the Court of Protection did record its intention that the deed of variation was not to considered a deprivation of assets. It remains to be seen whether the Local Authority or the Department for Work and Pensions will agree with this view or conclude that there has been deprivation of assets for their purposes.