Gifts Inheritance & payment to beneficiaries

Tuftywufty

I am joint executor of my parents individual wills with my sister. Both housebound in their 90s & failing health with max paid carer support. Us sisters both live away but visit & call regularly & do what we can for both parents. My brother (the 3rd sibling & not executor) lives closer & does shopping and sorts appointments & any day to day problems etc. No POA in place as neither parent will allow it. My father pays brother by cheque for shopping plus a good few hundred pounds every month for 'running around' with no records kept, there is also some cash payments (brother uses dads cash card with his permission to get him cash. When the time comes as executors how will this be accounted for. Me and my sister are concerned as the estate may be liable for inheritance tax. Will this money be considered gifts or expenses? Tbh we consider it a gift each month as there is no way there is that much expense & no records. The money is mainly paid from income but together with the private care costs and other household expenses it is whittling away their savings.

Another question; The will on 1st death states the estate goes to spouse & 2nd death it is split 3 ways to siblings. Once inheritance tax is paid by the estate of 2nd death; is IHT liability on gifts deducted from the amount paid to the beneficiary who received the gift? Or does everyone get an equal share after IHT is paid?
Thanks to anyone who can clarify for me.

poppystar

IHT is on the estate not individual beneficiaries so it will be equal shares after IHT is paid. Think carefully if you want these payments to be considered gifts. Do you even have accurate details of them? If they are expenses then you will not need to account for them. With no POA in place then no one is required to keep records and that seems to be your parents wish but if they lose mental as well as physical capacity then this could become more complicated. 

Keep_pedalling

If their house is worth £350k or more and their total assets are under £1M then you then IHT is not going to be an issue. The same applies if the house is worth less than that but total assets are below £650k+value of house.

Gifts from income can’t be claimed unless it is excess income which it is not in this case as they are currently eating into savings. You parents can gift £3000 each PA so if the running about money is below £500 per month and no other gifts are being made (other than birthday and Christmas gifts) then it will be exempt anyway.

I would be most concerned at the refusal to make LPAs, especially finance, as this will cause major issues if either of them loose mental capacity. 

Are they claiming attendance allowance? 

Flugelhorn

Sounds like your Dad appreciates the "running around" that goes on - many parents don't recognise how tying it can be for one of the children - Dad probably recognises that the runner should ultimately get more of the money than the others.

as others have said - check the IHT liability and also check whether the gifts exceed £3k a year AND have another chat re POA - could be very difficult and expensive if no-one has this 

Tuftywufty

poppystar said:

IHT is on the estate not individual beneficiaries so it will be equal shares after IHT is paid. Think carefully if you want these payments to be considered gifts. Do you even have accurate details of them? If they are expenses then you will not need to account for them. With no POA in place then no one is required to keep records and that seems to be your parents wish but if they lose mental as well as physical capacity then this could become more complicated. 

Thank you. No accurate details at the moment it's only what Mum has told us about the cheque written each month for brother & it's more than £500pcm. . It will no doubt be clearer when we have to get the statements after death (fairly close for them both). We have advised brother to keep records but he doesn't.

Keep_pedalling

Tuftywufty said:

poppystar said:

IHT is on the estate not individual beneficiaries so it will be equal shares after IHT is paid. Think carefully if you want these payments to be considered gifts. Do you even have accurate details of them? If they are expenses then you will not need to account for them. With no POA in place then no one is required to keep records and that seems to be your parents wish but if they lose mental as well as physical capacity then this could become more complicated. 

Thank you. No accurate details at the moment it's only what Mum has told us about the cheque written each month for brother & it's more than £500pcm. . It will no doubt be clearer when we have to get the statements after death (fairly close for them both). We have advised brother to keep records but he doesn't.

The other potencial issue is deprivation of assets if they are giving away their savings at a rapid rate. 

Tuftywufty

Keep_pedalling said:

If their house is worth £350k or more and their total assets are under £1M then you then IHT is not going to be an issue. The same applies if the house is worth less than that but total assets are below £650k+value of house.

Gifts from income can’t be claimed unless it is excess income which it is not in this case as they are currently eating into savings. You parents can gift £3000 each PA so if the running about money is below £500 per month and no other gifts are being made (other than birthday and Christmas gifts) then it will be exempt anyway.

I would be most concerned at the refusal to make LPAs, especially finance, as this will cause major issues if either of them loose mental capacity. 

Are they claiming attendance allowance? 

Thank you. House value about £600k & estate is more than £1m at the moment.
Yes they both receive the full amount of attendance allowance

poppystar

If you know exactly what your brother does then maybe gather information on what it would cost to have those tasks done by paid help. Getting paid help to do it would doubtless be a lifting of pressure on your brother no matter how happy he currently might be to do these tasks for your parents. Or maybe even either your sister or yourself do it for a week if that is possible to give your brother a break and maybe your father would then give you excess over the actual cost of shopping etc. so you would get a better idea of it all in terms of the number of hours involved and payments being made.

I certainly know of one friend who worked tirelessly and willingly to care for their parents in the last years. Having that same care done professionally would have eaten well into the savings and into the inheritance that was eventually shared equally between the siblings. Those siblings not undertaking the task therefore gained with a larger inheritance. Swings and roundabouts - and that doesn’t take into account the emotional toll of giving over a large part of your life to run another household. 

Even if your brother was getting £1k a month for his efforts that only reduces each sibling’s inheritance by £333 a month, £4k a year. A small proportion of the total if in IHT territory. And if you treat the payment as gifts rather than expenses you will also be paying more IHT which would further reduce that. It may feel a bit unfair but unless you are sure really large sums are involved or that there is coercion it may well be better to leave it be and save yourself the worry too. 

Brie

Word of caution for you to pass along....if brother is using dad's debit card, even with his permission, a bank will consider this fraud.  It's a completely understandable situation of course but a bank has to consider the account holder's best interests and they have no way of knowing if brother is helping his parents or scamming them.  

As for the £500 a month cheque - that's cheap help and I can't imagine anyone seriously considering that as a gift for IHT purposes.  If it's a steady amount then it is easy to explain.  And if you 2 other siblings are aware of it and don't object then it appears to be something organised for the benefit of your parents.  

So maybe the way around the first problem is for Bro to get his regular cheque for £500 and then to use his own debit card to make specific purchases that Dad then reimburses with another cheque on presentation of an invoice each month.  

Tuftywufty

poppystar said:

If you know exactly what your brother does then maybe gather information on what it would cost to have those tasks done by paid help. Getting paid help to do it would doubtless be a lifting of pressure on your brother no matter how happy he currently might be to do these tasks for your parents. Or maybe even either your sister or yourself do it for a week if that is possible to give your brother a break and maybe your father would then give you excess over the actual cost of shopping etc. so you would get a better idea of it all in terms of the number of hours involved and payments being made.

I certainly know of one friend who worked tirelessly and willingly to care for their parents in the last years. Having that same care done professionally would have eaten well into the savings and into the inheritance that was eventually shared equally between the siblings. Those siblings not undertaking the task therefore gained with a larger inheritance. Swings and roundabouts - and that doesn’t take into account the emotional toll of giving over a large part of your life to run another household. 

Even if your brother was getting £1k a month for his efforts that only reduces each sibling’s inheritance by £333 a month, £4k a year. A small proportion of the total if in IHT territory. And if you treat the payment as gifts rather than expenses you will also be paying more IHT which would further reduce that. It may feel a bit unfair but unless you are sure really large sums are involved or that there is coercion it may well be better to leave it be and save yourself the worry too. 

Appreciate your views. Brother doesn't really want to give up doing the running round despite offers of help. He's not exactly happy about it but I think he needs the money he gets for doing it. We don't really have a problem with the payments as such. The issue is how we will come to account for it as Executors & don't want to become liable by not declaring it properly when the time comes. The regular cheques will show on parents bank statements to our brother. HMRC may consider it gifts or if considered as paid work they may consider it income to our brother in which case he may become liable to pay income tax as he is over the personal allowance threshold. Just want to prepare to do the right thing

Keep_pedalling

Your brother and parents are going to cause you major headaches if they are not going to keep records of these gifts (the amounts involved are way above a bit of recompense for doing a bit of shopping).

You need to have a serious conversation with them regards this and their pig headedness about not making financial LPAs.