Normal expenditute out of income Vs Carehome deprivation of assets

Ewan_Kerr · 15 February at 4:38PM

It is my understanding that under HMRC inheritance tax rules, if my 88 year old mum was to gift to me and my brothers her excess pension money on a regular basis (ie set up a standing order) as a means of early access to our inheritance then that would be completely legal.

Further, she could backdate money sitting unspent in her bank account over the last few years (that has been put into ISAs).

However, one of my brothers thinks this may be counted as a deprivation of assets by the Local Authority should she ever need to go into care.

She is in good health, other than her eyesight, which may mean we will have to arrange for some home help to assist in cooking and cleaning. Her home is worth around £200,000. We live in Scotland.

Keep_pedalling · 15 February at 5:19PM

Gifts from excess income adds a great deal of complication for your executors and is only really a suitable option if your estate is already in IHT territory or getting close. Your mother really needs to maintain a reasonable amount of savings for her long term security. Apart from care costs you have to think about things like major house repairs and not to worry too much about who much energy you use keeping yourself warm through the winter months.

What does she have in the way of savings and what is her marital status?

Albermarle · 15 February at 5:21PM

It is my understanding that under HMRC inheritance tax rules, if my 88 year old mum was to gift to me and my brothers her excess pension money on a regular basis (ie set up a standing order) as a means of early access to our inheritance then that would be completely legal.

She can gift what she wants to who she wants, there is never anything illegal about making gifts of any size.

If her estate is big enough to be likely to be liable for IHT, then gifts made in the previous 7 years will normally be counted back into the estate. If the gifts are out of excess income, they may be ignored altogether , but there are rules around this. If her estate is not going to be big enough to pay IHT, then you do not have to worry about gifts at all in this respect.

However, one of my brothers thinks this may be counted as a deprivation of assets by the Local Authority should she ever need to go into care.

Your brother is correct. The LA rules are not the same as HMRC rules. However if she pays for herself, it will not be an issue. The LA are only interested in investigating deprivation of assets, if they are asked to pay for care.

dunstonh · 15 February at 5:26PM

It is my understanding that under HMRC inheritance tax rules, if my 88 year old mum was to gift to me and my brothers her excess pension money on a regular basis (ie set up a standing order) as a means of early access to our inheritance then that would be completely legal.

Any gifting is legal. However, the consequences of the gifting may lead to taxation or other issues.

However, one of my brothers thinks this may be counted as a deprivation of assets by the Local Authority should she ever need to go into care.

If means-tested benefits (not just care) are already in payment or expected, then any gifting would be considered deprivation of assets.

She is in good health, other than her eyesight, which may mean we will have to arrange for some home help to assist in cooking and cleaning. Her home is worth around £200,000. We live in Scotland.

Assistance with cooking and cleaning may be the first sign that care may be needed. It's potentially at the lower end of the probability scale, but an 88-year-old would typically have other issues beyond vision.

Brie · 15 February at 5:34PM

And if her sight is poor enough she needs help around the house then she should be applying for attendance allowance if she hasn't already. I doubt even the council will complain about that amount of money being given to a family member as there would be the assumption that it to pay to assist her - assuming the individual isn't also getting carer's allowance. All I mean is that it could be explained as the cost of taking mom out to lunch/dinner/garden centre once a week which are completely legitimate expenses for her.

Ewan_Kerr · 15 February at 6:06PM

Mum is a widow and her estate (inc my Dad's allowance) won't trouble the inheritance rules.

Her flat is worth around £200,000 and she has about £80,000 in the bank/ISAs. Therefor if she had to go into care she would be expected to self fund. At current rates of care, that would only last around 4 to 5 years.

She gets about £2000 a month from pensions. If she didn't give us her spare cash, then it might last 5 or 6 years. That, I'm thinking would count as deprivation.

eskbanker · 15 February at 6:15PM

I'm sure I've read on here before that the average stay in residential care is something like 12-18 months, so on average there wouldn't be any need to discuss deprivation of assets by claiming from the LA, but if she did burn through all of her assets to reach that point, wouldn't the family step in and offer to fund with the gifted surplus from earlier years?

otb666 · 15 February at 9:40PM

Deceased parents paid £600k over last 5 years before sadly passing away. Luckily they had enough to cover their care. We would not have expected this and they both went downhill very quickly in quick succession a year before requiring care. Then became more or less bed bound with total loss of all faculties including sight hearing speech. Lasted a fair while longer than expected as still retained appetites. My point is do not try to predict the future based on now.

Keep_pedalling · 15 February at 10:23PM

I really think that she should hold on to those savings. Her estate will have no IHT to pay and that money could be used to allow her to stay in her own home for as long as possible. It could help to pay for things like someone to come in and help with the housework or keeping the garden tidy as well as a nice emergency fund for repairs or adaption (creating a wet room for instance).