Dad gifting money to sons

bob_the_bodybuilder

Hello,

My elderly father recently went into hospital. To cut a long story short, it made him think about his finances and where he wants his money to go. He originally wanted me (his son) to have his online bank details and if anything happened to him, he wanted me to I take care of his money. I told him it’s not as simple as that and I would get into trouble.

He knows a will would be the best option, but in the meantime, he suggested gifting his money (some or all) to me and my brother via bank transfer. He has approximately £20,000 in the bank.

I’ve never had to deal with anything like this before so I did some research and basically my question here is asking if I have my facts correct so I can pass this information onto my Dad…

Am I right in thinking if he wants, he can gift the entire amount to me and my brother with no tax consequences providing he doesn’t pass away within 7 years of gifting the money? If he does, tax would be payable?

Or, could he gift £1,500 to me and £1,500 to my brother in one tax year and if he hasn’t used his £3K allowance from the previous tax year (he hasn’t), he could gift a further £1.5K to us both, therefore making a total of £3K each? And when the new tax year starts, a further £1.5K each? Total of £4,500 for me £4,500 for my brother. Am I correct here?

Or, if my brother or I have an existing debt to pay, for example a credit card bill or mortgage, and my Dad chose to pay that debt off, is that still considered a ‘gift’, or are the rules different for paying off debts?

On a similar note, how do HMRC even know? Are our bank accounts being monitored?

Frankly, I’m really quite naive when it comes to things like this and was quite appalled to learn such a relatively small amount of my Dad’s savings is even subject to tax, when people like him have already paid more than their fair share of tax throughout their lives.

Anyway, thank you for taking the time to read my post.

~ Bob.

eskbanker

It's not just about tax, there's also the potential issue of deprivation of assets - if he was to require residential care in later life, how would that be funded?

(but tax would only be an issue if his estate was large enough to incur inheritance tax)

elsien

It’s not just about where he wants his money to go, although the deliberate deprivation of asset is certainly something that you should both research with regards to any future care costs. Not just in a care home, but also care at home should he need it.

https://www.ageuk.org.uk/siteassets/documents/factsheets/fs40_deprivation_of_assets_in_social_care_fcs.pdf
Outside of that, if he gives all his money away and then you guys have a falling out, he’s leaving himself in an extremely vulnerable position. 

It’s also if he lose his capacity in the meantime and then there is no way to access his finances on his behalf without a long and expensive deputyship application.
so before you get onto wills, the first step should be a power of attorney. these can be done easily and cheaply online and I would suggest doing both the finances one and the one for health and welfare. 

Grumpy_chap

bob_the_bodybuilder said:

Hello,

My elderly father recently went into hospital. To cut a long story short, it made him think about his finances and where he wants his money to go. He originally wanted me (his son) to have his online bank details and if anything happened to him, he wanted me to I take care of his money. I told him it’s not as simple as that and I would get into trouble.

He knows a will would be the best option, but in the meantime, he suggested gifting his money (some or all) to me and my brother via bank transfer. He has approximately £20,000 in the bank.

I’ve never had to deal with anything like this before so I did some research and basically my question here is asking if I have my facts correct so I can pass this information onto my Dad…

Am I right in thinking if he wants, he can gift the entire amount to me and my brother with no tax consequences providing he doesn’t pass away within 7 years of gifting the money? If he does, tax would be payable?

Or, could he gift £1,500 to me and £1,500 to my brother in one tax year and if he hasn’t used his £3K allowance from the previous tax year (he hasn’t), he could gift a further £1.5K to us both, therefore making a total of £3K each? And when the new tax year starts, a further £1.5K each? Total of £4,500 for me £4,500 for my brother. Am I correct here?

Or, if my brother or I have an existing debt to pay, for example a credit card bill or mortgage, and my Dad chose to pay that debt off, is that still considered a ‘gift’, or are the rules different for paying off debts?

On a similar note, how do HMRC even know? Are our bank accounts being monitored?

Frankly, I’m really quite naive when it comes to things like this and was quite appalled to learn such a relatively small amount of my Dad’s savings is even subject to tax, when people like him have already paid more than their fair share of tax throughout their lives.

Anyway, thank you for taking the time to read my post.

~ Bob.

There is no tax liability on the recipient of a gift.

It sounds like your Father's Estate will not be large enough that IHT is a concern.

The priority with your Father's money is that it is available to support your Father to have the best possible quality of life that he can.  If money is suddenly gifted away just as he goes into hospital you can be certain that deprivation of assets would be brought into play should your father need to fund care needs.

The best thing to do, as you are a caring Son and want to be able to support your Father, would be to assure your Father that you are there to support him with anything he needs and the first step is to support him to prepare his PoA (Power of Attorney) as that will allow him to continue to have control and you can step in to assist as and when required.  I assume your Father still has mental capacity.

Albermarle

Am I right in thinking if he wants, he can gift the entire amount to me and my brother with no tax consequences providing he doesn’t pass away within 7 years of gifting the money? If he does, tax would be payable?

There is huge misunderstanding amongst the public about gifts.

Gifts are never taxable. However when someone dies, any gifts they made in the previous 7 years are counted back into their estate, when calculating any inheritance tax liability.
Currently 95% of estates are not big enough to be liable for IHT , so the gifts issue is normally irrelevant for tax purposes for the large majority of people.

Or, if my brother or I have an existing debt to pay, for example a credit card bill or mortgage, and my Dad chose to pay that debt off, is that still considered a ‘gift’, or are the rules different for paying off debts?

That is still a gift .

On a similar note, how do HMRC even know? Are our bank accounts being monitored?

They would not know, unless they decided to investigate.
If there was no IHT liability anyway they would not be interested.
If there was IHT liability and gifts were hidden, it is deliberate tax evasion and a criminal offence.

The suggestion above to organise a Power of Attorney is a good one. You can DIY it on line.

Make, register or end a lasting power of attorney: Make a lasting power of attorney - GOV.UK

elsien

Also to add, if this has come about in part because of his concern around future care costs because he’s below the 23 1/2 K limit he will only have to pay a contribution. He will not have to pay the full amount should  it be needed.

bob_the_bodybuilder

I have read all your replies and I am overwhelmed by all the sound advice given so thank you all for that.

I will write a fuller reply next week when I am able. In the meantime, thank you all again 🙂

~ Bob.

saajan_12

Key questions are: 
1) What is the aim here - minimise tax / avoid paying for care / avoid a will being challenged / make it easier for relatives to deal with costs of care / death in the near term? 

2) How much assets does he have roughly? 20k cash + a house, any investments, etc? 

Any advice can come based on the answers to those. 

bob_the_bodybuilder

Hello,

Once again thank you all for your replies. The advice given from all of you is much appreciated and I have particularly taken note of the recommendation for a lasting power of attorney and potential deliberate depravation of assets.

To cut another long story short (and to backtrack slightly), the reason my dad wanted to gift his money to me and my brother in the first place, is because he thinks my mother has more than enough money in her account, and 50+ years ago, the house was mortgaged solely in here name, even though the vast majority of the mortgage was paid off with his money. He feels throughout his life he has provided more than enough to my mother.

Basically they don't get on and he doesn't want my mother to have any of his cash! This is why I told him a will would be his best bet. I also mentioned to him the lasting power of attorney which he fully understands, but he is reluctant to pay for something when he assumes he will be mentally sound and make decisions for the rest of his life, and which will become void on him passing away.

With all your information passed onto my Dad, he again suggested to me yesterday gifting his money to me and my brother but this time, rather than gifting it for us to spend, he mooted gifting it to us with the intention of safe keeping it for him until the day he might need it. His thinking being, if care costs did come into play, we would send the money back to my Dad, and if the worst should happen, me and my brother would have his money, which is what he wants.

I know it's not as simple as that and I'm still hoping my Dad will just consider a will instead - it seems to be the best option, in my opinion. I will give him a week or so to have a ponder and I'll get back to him.

Thanks again everyone for your replies and advice,
~ Bob.

Grumpy_chap

" he again suggested to me yesterday gifting his money to me and my brother but this time, rather than gifting it for us to spend, he mooted gifting it to us with the intention of safe keeping it for him until the day he might need it. "

That would be wholly pointless in terms of avoiding IHT as it is GWR (gift with reservation).

It may also have drawbacks as the money could affect your eligibility for means tested benefits or be claimed by an ex-partner in the event of relationship breakdowns

elsien

LPA’s are £82 each online. You don’t need to pay a solicitor. And they also come in handy if someone is physically unwell, even if they still have all their marbles.

As an example relative has registered my power-of-attorney with their bank because they are undergoing cancer treatment and don’t know how the chemo side effects or surgery will impact on them being able to manage things. We’re hoping it won’t be needed, but it’s there if he needs someone to go and get money out for him or pay bills or anything like that. Just until he’s hopefully back on his feet again..