Refusing inheritance and deprivation of assets

HeparGirl24

Hello All

I hope you can advise this newbie.  My mother died earlier this year leaving everything to my 83 year old father in her will.  My father is horrified at this because he was under the impression my mother had left all her savings to me and my sister and is convinced that she never intended to leave her savings to him.  He says he doesn't want her money as he has the house and enough savings of his own.  The solicitor says he can sign a deed of variation effectively by-passing him and leave my mother's savings - approx £200,000 - directly to us.

To be honest, both my sister and could do with the money but we are concerned that if he needs care in the future this could be seen as deprivation of assets. Although he does need help paying the bills (my mother dealt with all that so I do it now using a LPA) and he has some memory problems following a recent stroke, he actually manages well at the moment at home and has not been assessed for any sort of care package.

Does anybody know if refusing his inheritance would be seen as deprivation of assets?  How many years in care would an 83 year old man reasonably be expected to self fund?

Keep_pedalling

Assuming there are no other occupants in his house that would prevent it being included in any financial cost for residential care, It sounds like he has ample assets of his own so DOA should not be an issue.

I would however suggest that he should make a simple gift rather than doing it be a deed of variation. A deed of variation offers no advantages in this case and may even lead to some avoidable IHT liability on his death should he survive 7 years after the gift.

HeparGirl24

OK thanks. There are no other occupants. The solicitor thinks probate won't be sorted until the autumn so we have some time to find out how it's best to go about it. 

msb1234

Stats from the ONS
“Life expectancy for care home residents between 2021 and 2022 ranged from 7.0 years at age group 65 to 69 years, to 2.9 years at age 90 years and over for females, and from 6.3 years at age group 65 to 69 years, to 2.2 years at age 90 years and over for males.”
So for a man your father’s age he might be expected to live around 3 years in care. Depending on the value of his house, he should be ok. 

Malthusian

HeparGirl24 said:

Does anybody know if refusing his inheritance would be seen as deprivation of assets?  How many years in care would an 83 year old man reasonably be expected to self fund?

There's no rule about how many years in care you are expected to fund (for starters, nobody knows what their care costs will be). But in this case it is not deliberate deprivation of assets as there is no expectation he will need care in the near future, and when he does he has money of his own to pay for it. The burden of proof is on the local authority to show he was trying to dodge care costs.
I agree with KP - it sounds like the solicitor has reached for the "deed of variation" button on autopilot.
1) If you do a DOV in favour of you, then the new legacy to you will use up £200,000 of her Nil Rate Band and your father will therefore have less NRB available on the second death. So if their total estate is over their nil rate bands, the £200,000 will eventually incur an IHT charge on your father's death.
2) If he simply gives you the money, he will still have the full nil rate band available to transfer from her. If he lives 7 years after the gift there might not be an IHT charge on the £200,000. If he doesn't live 7 years the gift would be added back into the estate, and would use up £200,000 of the virgin nil rate bands, i.e. you are in exactly the same position as 1). It is a shot to nothing.
A deed of variation is more commonly used in scenarios where spousal exemption doesn't apply, e.g. a deceased parent leaves money to their child, they don't want it so they make a DOV to leave it to the grandchildren. If they gifted it to the grandchildren without a DOV, there is a risk that they die within seven years and pay IHT twice. A DOV means it passes through 1 Inheritance Tax gate instead of 2.
In your scenario it is currently passing through 0 Inheritance Tax gates (there isn't a gate between spouses) and your solicitor is suggesting you redirect it through 1 Inheritance Tax gate between you and your mum for no apparent reason. When your father has a chance to get it around the IHT gate between himself and you, by giving it to you and living seven years.

Sarahspangles

I recently read that fewer than 3% of people ever need to go into a care home (I’m still trying to track down if that’s correct).  

From personal experience it’s more likely that an older person will want to spend their money on a new property or changes to an existing property to retain their independence, scaling up the amount of support they bring in over time.  Whether or not this is less expensive than a care home is a secondary consideration.  

MobileSaver

Malthusian said:

HeparGirl24 said:

Does anybody know if refusing his inheritance would be seen as deprivation of assets?  How many years in care would an 83 year old man reasonably be expected to self fund?

it is not deliberate deprivation of assets as there is no expectation he will need care in the near future, and when he does he has money of his own to pay for it. The burden of proof is on the local authority to show he was trying to dodge care costs.

It's not clear whether "enough savings of his own" means enough to pay for his own care but given the OP's father is 83 and has recently had a stroke I would be amazed if the local authority didn't go down the deprivation of assets route if there's a shortfall in funds.

However worst case in practice is they'll just put a charge on the house (assuming it's worth £200k+) so still a win for the dad/OP as the children get to use the £200k now rather than wait 10 years or whatever when the house eventually gets sold.

Keep_pedalling

MobileSaver said:

Malthusian said:

HeparGirl24 said:

Does anybody know if refusing his inheritance would be seen as deprivation of assets?  How many years in care would an 83 year old man reasonably be expected to self fund?

it is not deliberate deprivation of assets as there is no expectation he will need care in the near future, and when he does he has money of his own to pay for it. The burden of proof is on the local authority to show he was trying to dodge care costs.

It's not clear whether "enough savings of his own" means enough to pay for his own care but given the OP's father is 83 and has recently had a stroke I would be amazed if the local authority didn't go down the deprivation of assets route if there's a shortfall in funds.

However worst case in practice is they'll just put a charge on the house (assuming it's worth £200k+) so still a win for the dad/OP as the children get to use the £200k now rather than wait 10 years or whatever when the house eventually gets sold.

It highly unlikely DoA would apply for for home care visits and if he needs residential care then there is the house to fall back on.

Sarahspangles

Keep_pedalling said: It highly unlikely DoA would apply for for home care visits and if he needs residential care then there is the house to fall back on.

Yes, from the OP it’s clear Dad isn’t trying to avoid paying (potential) care home fees, he has the means, he’s not required to maintain them in the most liquid form possible and can pass savings on now if he likes. I suppose the next question is whether there is an LPA ready to use if Dad needs his daughters to step in, including if there are decisions like letting his property to fund residential or nursing care.

Pennylane

Sarahspangles said:

I recently read that fewer than 3% of people ever need to go into a care home (I’m still trying to track down if that’s correct).  

From personal experience it’s more likely that an older person will want to spend their money on a new property or changes to an existing property to retain their independence, scaling up the amount of support they bring in over time.  Whether or not this is less expensive than a care home is a secondary consideration.  

Our solicitor recently told us the same.  

Spendless

You can't possibly tell how long someone will be in a care home for. My Nan went into hers a month before her 91st birthday  with dementia and died last month exactly 1 week before her 8 year anniversary of being in there at just short of being 99 years old.