Future Planning within Retirement

jonnypb

A close friend is looking at gifting some money to their children, but I highlighted some possible issues with it and said that they may need further advice.

Retired married couple with a house that has no mortgage (£165k value), private pension for husband, state pension for both and roughly £250k savings.

So the total value of the estate will fall below the IHT rule, so I guess gifting of any money to siblings children wouldn't really matter when it comes to IHT and the 7 year rule?

I guess the grey area would be what would happen if a lump sum of money was gifted to siblings children to help them pay off some mortgage.  How would this impact any potential future care home costs?  Both partners are fit and well and currently have no inclination of needing any care in the foreseeable.

The married couple would still keep their house and still have their pensions and decent amount of savings.

Have looked at this and there seems to be 3 main points when it comes to deprivation of assets.

1) If you knew you would need care and support at the time you gave away your assets.
Currently neither needs any care, or looks like that they require any in the foreseeable

2) If paying for care and support was a significant reason for you giving away your assets.
Helping siblings to reduce their mortgages at a time when both parents are fit and healthy

3) If you knew you would need to contribute money towards your care.
Neither parent looks like they'll require any care in the foreseeable

Deprivation of Assets in Social Care | Age UK

Do people have any first hand experience with this and have been in any similar situations?  Or have any advice that I can pass on, or direct them to seek further advice from somewhere?  From what I can see, care home costs don't seem to have the same 7 year rule like the IHT.

Thanks

Albermarle

jonnypb said:

A close friend is looking at gifting some money to their children, but I highlighted some possible issues with it and said that they may need further advice.

Retired married couple with a house that has no mortgage (£165k value), private pension for husband, state pension for both and roughly £250k savings.

So the total value of the estate will fall below the IHT rule, so I guess gifting of any money to siblings wouldn't really matter when it comes to IHT and the 7 year rule? Correct

I guess the grey area would be what would happen if a lump sum of money was gifted to siblings to help them pay off some mortgage.  How would this impact any potential future care home costs?  Both partners are fit and well and currently have no inclination of needing any care in the foreseeable.

The married couple would still keep their house and still have their pensions and decent amount of savings.

Have looked at this and there seems to be 3 main points when it comes to deprivation of assets.

1) If you knew you would need care and support at the time you gave away your assets.
Currently neither needs any care, or looks like that they require any in the foreseeable

2) If paying for care and support was a significant reason for you giving away your assets.
Helping siblings to reduce their mortgages at a time when both parents are fit and healthy

3) If you knew you would need to contribute money towards your care.
Neither parent looks like they'll require any care in the foreseeable

If the above three points are valid then in theory at least, it would not be seen as deprivation of assets.

Deprivation of Assets in Social Care | Age UK

Do people have any first hand experience with this and have been in any similar situations?  Or have any advice that I can pass on, or direct them to seek further advice from somewhere?  From what I can see, care home costs don't seem to have the same 7 year rule like the IHT. Correct, this is often misunderstood. Remember IHT is HMRC's area, whilst care costs are the responsibility of the local authority, so the rules are not the same and each local authority may interpret situations differently.

Thanks

Some comments in bold above.

The married couple would still keep their house and still have their pensions and decent amount of saving

Remember that if you are paying your own care costs, the local authority is uninterested in your finances, or what you have given away.
Only if you say your assets are limited and need the council to pay, then they may take an interest in past transactions.

Sarahspangles

There are implications that relate to care.

It's really common for someone to have some medical issue that requires hospital care and for there to be no option other than discharge to a care home because their home is unsuitable.

A bungalow or home suitable for a stair lift, and a walk in shower are the priorities. So your friends could give some thought to whether their current home will support them retaining their independence before closing down options by gifting money. I know from our parents how big an issue this was - and a worry for their children.

tacpot12

Looking at this from the other end of the lens as it were. To get help with care fees at all, the person needs to have savings of less than £23,250. 

This means that they will have to give away or have spent £227k! If their pensions cover they day-to-day spending, then they will mostly have to give their savings away. I think the local authority will look into why they have done this, given the amount of money involved. Givign it away while there is any chance you might need it seems imprudent. You could end up in the cheapest care home the local authority will pay for, rather than the best home for you. 

squirrelpie

'Siblings' means brothers or sisters. 'Offspring' is another word for 'children'.

jonnypb

Some good advice and some points that I can consider for myself when I retire in 20+ years time!!

When it comes to things like this I guess you have to find a happy medium, being able to help and provide to your children, but to also have enough assets to enable you to have a decent care home if it ever comes to that.

I think they were more worried about the IHT to be honest, but I said to them their estate falls below the IHT allowance, so in that sense, if they choose to gift x amounts of money then that wouldn't appear to be too much of an issue.

As pointed out, if the care home is self care, as it would in this circumstance due to their assets, then the care home is not worried about money that has been gifted.  I guess the question would be what happens if money runs out, or if only one person ends up in the care home and the spouse stays healthy and lives in the house, could the spouse be forced to sell?

Albermarle

jonnypb said:

Some good advice and some points that I can consider for myself when I retire in 20+ years time!!

When it comes to things like this I guess you have to find a happy medium, being able to help and provide to your children, but to also have enough assets to enable you to have a decent care home if it ever comes to that. That is about right.

I think they were more worried about the IHT to be honest, but I said to them their estate falls below the IHT allowance, so in that sense, if they choose to gift x amounts of money then that wouldn't appear to be too much of an issue. Many people are excessively worried about IHT. Even if you have to pay ( and most do not) there are worst things in the world than paying tax after you are dead.

As pointed out, if the care home is self care, as it would in this circumstance due to their assets, then the care home is not worried about money that has been gifted.  I guess the question would be what happens if money runs out, or if only one person ends up in the care home and the spouse stays healthy and lives in the house, could the spouse be forced to sell? If one still lives in the family home, then they will not be forced to sell.

Remember needing care at home is much more likely than going in a care home. However if it is very high level, it can also be expensive.