Granny moving in with us - potential issues with IHT and POAT

drewwa

Hi Folks,

Whilst I will definitely seek professional advice on this one, I wanted to get a sense of options here. I'm only looking for suggestions on IHT and POAT (the emotional/practical issues have been ironed out elsewhere).

Situation

• Wife and I are moving to a new house which we plan to by buy with no mortgage required. We're in early 50s.
• Granny is 80+ and we plan for her to move in with us (in a self-contained annex/house on the same plot of land) with as much independence as possible.
• We have £500k and Granny plans to give us £180k to purchase this property (granny's total assets are ~£345k - £120k earmarked for other relative who is an Australian citizen, rest held as cash for future care costs)
• Granny also has very generous final salary pension (but this will not be inherited by us) approx £3k/month. She will contribute to running costs of new property... and later this money will be diverted for care costs as required.

Questions:

• Does POAT apply? (More specifically - Are there ways for us to arrange things so it doesn't apply?)
• How does POAT interact with IHT given granny's assets are only just above threshold?
• Does the 7 year rule apply to Granny's £180k?
• Does the Australian relative have any bearing on IHT?
• Any other pitfalls/things to consider with this plan?

Our objective is to minimise admin/paperwork/legals for Granny by managing as much paperwork as we can (eg. car maintenance, bills, insurance, taxes etc.) as whilst she is totally in command of her faculties right now, she gets extremely anxious about such things. We want her to have maximum quality of life for as long as possible.

Ideally she would just like to live with us with no obligations.responsibilities at all, but I appreciate the law may not entirely allow for this.

Cheers,

Drew.

Jeremy535897

Did Granny inherit any nil rate band from her husband? Consider also whether there might be some RNRB due to downsizing relief. If it is clear granny's estate is going to be within the nil rate band even with the £180,000 gift, then it may not be an issue if granny can elect to apply the GWR rules instead of the POAT rules.

POAT is discussed here:
https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm44004
https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm44005
https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm44075

JGB1955

The Australian relative may have to accept they will not get everything they may be expecting.  Granny only has £45K of 'spare' cash.  That could run out (taking into account £36K p.a. income) within less than 3 years of residential care at (a very conservative) £1000 a week.