Ill Parent - Financial & Estate Planning

jmr95

Hi there,

Looking for some guidance (I know it's not advice) regarding an ill parent looking to add me to their bank account and making it a joint account. Single parent, estate is under IHT threshold. I am married, already have a joint account with my spouse.

If I am added as a joint account holder:

- I understand this will create a financial link. I already have my own mortgage, and a good credit history. What sort of impact might this have? Parent in question also has good credit, and had a good income with a good pension.

- How does this impact inheritance/estate? The total estate value is below the current IHT threshold anyway as noted, but lets just say the parent starts to add money to this joint account...as a joint account holder I can withdraw/transfer but but what do I need to be aware of that? I assume this counts as the estate and is subject to 7 year rule, but it's not fully clear since there is the 3k annual limit to consider too,,,but I am not sure any of it matters given there wouldn't be any IHT. I have read about how there can be exceptions if it is clearly intended as a gift; but how does that work?

Example: I get given 10k now. Is there any income tax element? or is it purely estate?

And this leads me to the dreadful practice of being forced to sell off assets to pay for care if it ever come to that. This is likely years away (if ever it happens) but if I get given money, could that be seized later to pay for care, or does that only apply to a house?

The house is mortgage free. If the parent was to downsize and add the difference to a joint account and I transfer it away, are there any time limits within which that may be a problem?

Thanks

elsien

I’m going to quibble at your phrasing  of the “dreadful practice” of assets being “seized” to pay for care.
As a country and with the social care system the way it is there is simply not the money for everyone’s care to be funded for them. And I fail to see why paying for your own care if needed is such a terrible thing to have to do. 

Why should taxpayers pay for your parents care just so that you can inherit?


I will repeat yet again that money also gives choices and don’t underestimate the importance of that. 

Having got off my soapbox and gone back to your questions, there is no time limit on deliberate deprivation of assets when it comes to care costs. If someone is already in poor health, there is a reasonable expectation that they will need care at some point in the future, and they give money away with the intention of avoiding having to pay, then the local authority can go back as far as his necessary. That applies to all assets over a certain amount, whether in money, property, or however else it’s tried to be hidden. 

Keep_pedalling

No absolutely not, what you should do (if not already in place) is get lasting powers of attorney in place in case he ever looses mental capacity.

Sarahspangles

My OH became a joint account holder with his mum after his dad died, at her request. It was a practical arrangement which meant he could help her with running the household, since most things are online now. He also got on with registering the pre-existing power of attorney. That, and good record keeping, were a protection if there was ever an accusation that she was being financially abused.

They didn’t keep large sums in that account - anything above a couple of months’ household expenses went into savings accounts in her name.

When she died, the money fell into the estate. I guess he could - technically - have claimed the balance at that point as joint account holder but it was more appropriate/practical at that point to use the account and the balance as the Executors’ Account. Funeral expenses were paid from there, and utilities etc could debit and credit the account as the final bills were settled.

If you get set up as an Attorney you’re not allowed to use the relative’s funds in a way that isn’t in their interests so you wouldn’t be able to make excessive gifts or transfer away monies.

Pollycat

It's a while ago but I believe my sister had a debit card attached to my mum's current account. It was in my sister's name and allowed her to pay for shopping items.

IIRC, it was a bit of a faff to organise (obviously to safeguard the account holder) but it worked well. 

+1 to the LPoA recommendation.

jmr95

Keep_pedalling said:

No absolutely not, what you should do (if not already in place) is get lasting powers of attorney in place in case he ever looses mental capacity.

Should have mentioned that - this is in place for finance and health already

This is more planning while its still in sound mind etc

Sarahspangles said:

My OH became a joint account holder with his mum after his dad died, at her request. It was a practical arrangement which meant he could help her with running the household, since most things are online now. He also got on with registering the pre-existing power of attorney. That, and good record keeping, were a protection if there was ever an accusation that she was being financially abused.

They didn’t keep large sums in that account - anything above a couple of months’ household expenses went into savings accounts in her name.

When she died, the money fell into the estate. I guess he could - technically - have claimed the balance at that point as joint account holder but it was more appropriate/practical at that point to use the account and the balance as the Executors’ Account. Funeral expenses were paid from there, and utilities etc could debit and credit the account as the final bills were settled.

If you get set up as an Attorney you’re not allowed to use the relative’s funds in a way that isn’t in their interests so you wouldn’t be able to make excessive gifts or transfer away monies.

Thanks, that's a particularly pertinent point you have mentioned at the end there. That's almost exactly what I'd expect this account to be used for, too. I am just trying to consider the ifs and buts to be mindful of later.

Keep_pedalling

jmr95 said:

Keep_pedalling said:

No absolutely not, what you should do (if not already in place) is get lasting powers of attorney in place in case he ever looses mental capacity.

Should have mentioned that - this is in place for finance and health already

This is more planning while its still in sound mind etc

Sarahspangles said:

My OH became a joint account holder with his mum after his dad died, at her request. It was a practical arrangement which meant he could help her with running the household, since most things are online now. He also got on with registering the pre-existing power of attorney. That, and good record keeping, were a protection if there was ever an accusation that she was being financially abused.

They didn’t keep large sums in that account - anything above a couple of months’ household expenses went into savings accounts in her name.

When she died, the money fell into the estate. I guess he could - technically - have claimed the balance at that point as joint account holder but it was more appropriate/practical at that point to use the account and the balance as the Executors’ Account. Funeral expenses were paid from there, and utilities etc could debit and credit the account as the final bills were settled.

If you get set up as an Attorney you’re not allowed to use the relative’s funds in a way that isn’t in their interests so you wouldn’t be able to make excessive gifts or transfer away monies.

Thanks, that's a particularly pertinent point you have mentioned at the end there. That's almost exactly what I'd expect this account to be used for, too. I am just trying to consider the ifs and buts to be mindful of later.

Good so there is no need to complicate things with joint accounts. If he would like you to have access now so that you can do things like get his shopping you can register the LPA with his bank and they will issue you with your own card. 

jmr95

Thanks - I didn't know that was an option. I've no desire to be scrutinised for any 'spending' etc, it was more peace of mind for the parent and at their suggestion, not mine. The illness has no impact at all on cognitive or physical ability (at least in the sense of day to day activities like shopping, can still drive, etc).

It's simply trying to get ahead of anything that may change, but the joint account sounds like it may be a step more than is needed and potentially cause me issues for no actual benefit to either of us, so I think I will steer clear of that for the time being and rely on the LPoA.

I am still interested to understand the rules around inheritance - the 3k limit means its just a 'gift' but anything over that is subject to the 7 year rule, is how I understand it, but I think I need to understand a bit more about the rules on the percieved 'deliberate deprivation of assets'

elsien

Deliberate deprivation of assets comes down to the intention in giving assets away and whether it is done specifically to avoid care costs.
So there is no timescale but if someone gives most of their assets away (although still generally speaking a bad idea) while comparatively fit, young and healthy, there isn't going to be that causal link. Whereas if someone gets a dementia diagnosis and promptly gives their house to their kids, then that's going to be a lot easier for a local authority to prove the intention. 
There isn't a hard and fast rule - it is very much down to individual circumstances at the time. But there is no time limit on how far back the LA can look - many people think it's seven years, the same as for inheritance tax but that isn't the case. 
Of course if someone has enough assets that they can give lots away and still fund themselves if needed, no-one is going to care either way. 

Deprivation of assets in social care (ageuk.org.uk)

jmr95

That's really helpful, thanks. It seems rather subjective, the criteria is vague, and the thresholds seem very low, I read even some mention of you might not even be able to have a luxury holiday without falling foul of this. Alas, that's a future matter, and one which may never actually be relevant. Very useful info.

elsien

It really is about the context.  If you've always taken luxury holidays then you can argue it's just carrying on what you've always done. Ditto a big holiday for a big event.  But if you've always lived carefully and suddenly start treating all your family to expensive holidays for  no obvious reason, that's when questions are more likely to be asked.
For me, its a balance. Yes I want to live well now, within limits. But I've also seen the difference having money can make to people in care homes where they have to pay extra for staff support to go out into the community, or get a better quality place. So I'm not wanting to spend it all so the state will fund me because I've seen what that minimum level of support can look like. Not always - some are ok - but often enough.