Elderly widowed mother and IHT planning strategies?

H657

Keep_pedalling said:

lohr500 said:

Thanks again everyone.

Just so I am clear @Keep_pedalling are we saying that if she did gift £200k now (outside of any gifting from surplus income) then that £200k forms part of the IHT calculation if she passes within the 7 year rule? So the GC would not have any iht liability if the total asset value was less than £1M including the £200k gifts.

That is correct

We have just been through this scenario with FIL’s estate. He (aged 90+) gifted £200k 18 months prior to his death on realising he was in IHT territory.

The gift was brought back into the estate for the IHT calculation, the estate paid the total IHT due, with no IHT implications for the gift recipients.

lohr500

Many thanks again for all the input.

I will discuss the detail with my mother and brother and then with the four GT if applicable, so everyone is clear on the plan.

First and foremost the £200k gift will not affect her standard of living and (with the exception of possible long term live in carer) my view is that the remaining assets should give reasonable provision for nursing home care.
The last thing any of us want to do is cause her any distress at her time of life. She has been through a lot in recent years with my father's illness and now needs to enjoy the time she has left with us.

mta999

You probably know but you mentioned house contents -  unless you have valuable antiques or something like that, house contents are generally valued at a surprisingly low amount

lohr500

I've just had a discussion with mum about the contents value of her house, recognising that insurance replacement value is very different to what they would actually be worth on the 2nd hand market!!!

She and my dad made some good decisions several years ago to sell off the valuable pieces of jewelry and contents. All that's left is old fashioned furniture, ancient flat screen TV's and lots of bric a brac that would probably be hard to give away!!!

With regards to the gifting idea, she is all for it and is keen to make the gift payments as soon as possible.
I just want to run the whole picture past my brother so we are both on the same page and so I can map out the final financial position after completing the probate process for dad. 

silvercar

Sea_Shell said:

Does she still make all the decisions herself about her finances, or do you have (and are using) a Power of Attorney.

AIUI, once (if) she loses capacity to CHOOSE to gift, then her attorney cannot gift unless it was specified on the documents, and even then it might be a grey area. 

Mitigating IHT isn't in the best interests of Mum, but of her beneficiaries.


p.s. - Still driving at 90?   Do you need to have "the conversation" about that?   

Thank you for mentioning this. I hadn't previously thought of the implication of helping say one grandchild with a house deposit and then having to utilise an LPA would mean that a grandparent couldn't help other grand children with the same house deposit when they reached the stage of home buying. Of course you could adjust a will, to allow for the fact that one grandchild had already had a substantial gift, but that doesn't help a grandchild in "need" and expectation of a similar gift at a relevant time. 

lohr500

That is a good point. Although I have LPA (Financial & Health) mum is currently capable of making decisions.

In the specific case we are discussing in this thread, all four GC will be receiving the same amount at the same time, so the time delay isn't relevant.

But it does make me think about ongoing gifting from surplus income if she ever loses capacity.
It possibly wouldn't be an issue because at that point she would be needing care services, so it is unlikely she would continue to have surplus income.

In such a scenario, would the desire to continue with ongoing gifting from surplus income need to be written into the formal LPA paperwork, or could a signed and independently witnessed instruction suffice? 

BooJewels

I had been going to comment earlier about the value of contents, but someone had mentioned it.  It's entirely possible that when the time comes, it might even cost you more to clear the contents than any remaining value. 

With one estate we managed to come out a bit ahead as there were still enough nice things left to sell, albeit at way less than you'd hope and there was enough left in the house when we instructed the clearance for their fee to be modest.  In the second house we did, the only things of value were either left to named beneficiaries anyway or we kept them between us.  There was nothing of value left when we instructed the same clearance company, so their fee was higher. We still made a lot of trips to the tip, filled skips and stocked up several local charity shops.

My thoughts on future gifting and an LPA would be to word any such instruction you do include very carefully - you wouldn't want to have to honour gifting if it would use funds she needed for care.  It's a while since I was an active Attorney - but I seem to think there's something in the code of conduct (Mental Capacity Act) that says Attorneys can make affordable gifts if it is inline with customary practice by the Donor.  You can't suddenly give someone a large cash birthday gift if it had never been done by the Donor, but if she always gave grandchildren £20 on their birthdays, then it's fine to continue to do so on the Donor's behalf.  I certainly did this both times I was an acting Attorney, often on the Donor's instruction.

lohr500

Just to follow up on this thread : 

Today we have my mother who is over the moon that she has been able to help her four grand childen to get on, or progress up the housing ladder. 

And my brother, myself, our spouses and our four children who cannot thank their grandma enough for her generosity in helping them out. 

Thanks again for all the input to my original questions.