Normal expenditute out of income Vs Carehome deprivation of assets

Nick_Dr1

I thought that there was a 2 year rule (guideline) for income converting to capital, so if excess income from pensions is held as cash, it is counted as income for 2 years by the taxman.

poseidon1

A discussion about the gifts out of surplus income exemption is entirely pointless for an estate that as no realistic prospect of getting any where near the minimum Husband/wife IHT threshold of £650k. So no further reference should be made to this exemption, its meaningless here.

Therefore from the OP' s point of view this thread is solely about the moral question of taking cash from his mother, if it transpires she may need it herself in future if care home fees ever becomes an issue, or failing that any capital spend on her home that might make a sizeable dent on savings.

@Keep_pedalling's last post ( in my opinion) seems to be most relevant in this regard.

ukdw

https://forums.moneysavingexpert.com/discussion/comment/81885868#Comment_81885868

re gifting "leading" to taxation, its my understanding that whilst gifting does add complication, it can sometimes reduce taxation (if done at the right time and with appropriate documentation) , but I can't think of any way of gifting leading to extra taxation.

Ps/ I guess one example is a gift that is given back, which I think might have to be counted twice in IHT calculations for 7 years.

Cobbler_tone

One thing I learnt recently is that you pay tax on any interest on bank accounts (in full) from the moment someone passes away. That can generate a decent sized bill, especially if it takes 'X' over 12 months to settle accounts due to atrocious service. Not for here but some (well known) companies really do generate money for nothing. I can see it being a future scandal.

Marcon

One thing I learnt recently is that you pay tax on any interest on bank accounts (in full) from the moment someone passes away. That can generate a decent sized bill, especially if it takes 'X' over 12 months to settle accounts due to atrocious service. Not for here but some (well known) companies really do generate money for nothing. I can see it being a future scandal.

https://www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-manual/tsem7458

Where's the 'scandal'?

Linton

https://forums.moneysavingexpert.com/discussion/comment/81892143#Comment_81892143

"You" dont pay the tax on ionterest gained. The tax is charged to the estate before any distribution takes place. So if the will says that you get £100K, that is what you get. There is no deduction of any tax nor any benefit from any interest. It is the remaindermen who gain from the interest and loose from any tax due and hence gain overall sInce the interest exceeds the tax.

Surely it would be unreasonable for an estate to receive interest tax free.

Cobbler_tone

https://forums.moneysavingexpert.com/discussion/comment/81892393#Comment_81892393

The point was a well known organisation taking over 12 months to administer a straight forward probate from 4 bank accounts…..for a fee of several thousands. They held the vast majority of the money for 4 months until the final one came through. I think they pray on those who are not emotionally in a position to do probate themselves. Another family member did their own (slightly more complex) and it came through in 5 weeks. Appreciate that they are businesses but you should at least expect a decent level of service.

It wasn't me but the person involved has a complaint in and some clearly documented lack of service at best, or incompetence and/or painfully slow action.

On the tax on interest….wasn't a complaint, it was something I learnt. Under normal timescales I guess it wouldn't usually be that much, unless you are settling big numbers. Things you wouldn't automatically think of unless you have dealt with it before. A bit like the Bereavement Support Payment.

Horrible things that most have to go through at some point.