IHT - GWRoB - Complications

Grumpy_chap

My wife doesn't have a PB holder's number as she currently has zero PBs.

I assume the voluntary payment to HMRC would be considered the same by FiL as if we bought furniture. "Well, if I ask for the money back, you'll just have to make up that shortfall from other funds."

We are comfortable that this is GWRoB. No point arguing with FiL on that point as he denied such a thing as GWRoB exists. No benefit in causing family rupture over it.

The focus is understanding any impacts.

silvercar

"effectively be looking after FiL's money and would give it back to him if he asks for it but if he never asks for it before he dies then he guesses we can just keep it."

So nowhere has he said he wants the winnings back. He is just providing opportunity money. I understand his view. If he never asks for it back it’s a PET. If he needs it back presumably it will be for care needs, at which point he will call any money your provide as a gift or a loan against the (future) estate. After 7 years have passed, the P of PET elapses and the length of time means that no one needs to hold historic records.

In practical terms, your wife will need to buy her own premium bonds, so he will need to gift the money to her and she effect the purchase. If you didn’t want to use the money for that purpose, the get around is to buy a small amount of premium bonds to generate an account number that he could use to monitor as the app only shows winnings not the amount held. What you then do with the money is up to you, one option would be a savings account. In the long term you get the interest and eventually return the cash to him if he wants it, or his estate if you feel that is the correct action.

Grumpy_chap

Thank you @silvercar

You are the first comment that suggests this could be a PET. No-one else has queried the interpretation as GWRoB for which there are the following indicators:

• "effectively looking after my money" comment
• instruction the money is to go into PBs
• ability to call the money back on request / demand

If he never asks for the money back, at which point does it become a GIFT and no longer GWRoB? Presumably, at that point, we can take the money and do whatever we wish with it. That does not become the situation while he remains alive and can ask for the money back.

I think we would get caught out of we tried to "game" things. If we only purchased a nominal amount of PBs, then the prize rate would be low, potentially zero. He would know the typical prize rate that would be expected. If we went a couple of years with zero, that would just look wrong - very bad luck at least.

You are correct that nowhere has he said he wants the winnings back. BUT, I think the assumption might well be that any prizes would be small.

£50 prize would probably be shrugged off with "have a meal out" and no-one would be particularly concerned either way.

Big prize might be another matter altogether and might flag comment from FiL and / or BiL.

phlebas192

If there is any ability to call the money back then it is GWRoB. It can only be a PET if a transfer has taken place.

As for PBs, if there is any agreement that FiL would receive some or all of the prizes then that would be against the rules as bonds can only be held by a single individual. Any prizes won would be forfeit and I believe it is even possible for the bonds themselves to be forfeit in cases where there is an intent to circumvent the rules.

silvercar

” "effectively looking after my money" comment /

ability to call the money back on request / demand

If he never asks for the money back, at which point does it become a GIFT and no longer GWRoB?”

I would guess, his view would be that it is a gift from the start unless he wants it back. Which logically doesn’t make sense, but it’s how (some) people think when they are worrying about tax, particularly IHT. You could re-phrase it as a gift with the expectation that, should he ever need money, his daughter would gift to him a similar amount, in recognition of the help he has given to her in the past.

”instruction the money is to go into PBs”

A conditional gift. He’s gifting PBs, but the way PBs work is that your wife has to buy them for herself.

DiamondLil

I'm sorry, but he is a bully; just say "no".

Grumpy_chap

I would guess, his view would be that it is a gift from the start unless he wants it back. Which logically doesn’t make sense

Yes, he is solely doing this because he thinks that gifting the money now and expecting to survive 7 years will take this amount outside of IHT.

However, it is not a freely unencumbered gift because he is being prescriptive as to how the money is invested and also stated that we would "effectively be looking after his money and would give it back to him if he asks for it but if he never asks for it before he dies then he guesses we can just keep it."

So, our take on that was that this was a GWRoB, not a PET.

Everything would be far simpler if it is a PET.

I understand the comment about the practicality of gifting PBs - that he has to gift the money and wife has to buy the PBs. I am not sure that makes any difference to the PET / GWRoB assessment.

If he was gifting (unencumbered gift) of PBs, we could receive the gift, buy the PBs and then sell them in 6 months' time and spend the lot on whatever foolish thing my wife chose.

Here, the clear expectation is that the PBs are purchased and held and available for FiL to call back at any time.

silvercar

https://forums.moneysavingexpert.com/discussion/comment/82158322#Comment_82158322

I don’t think the issue is that he insists it is spent on PBs. It’s perfectly legal to make a gift conditional on it being spent in a certain way. It’s still a gift. Similar example of a gift with an insistence on how it is spent is a gift towards a house deposit. Mortgage lenders accept it as a gift, even though it is made on the understanding that it is only to be used for a deposit. The bank of Mum & Dad often help with house deposits, they wouldn’t be giving the same amount and at the same time if there was a thought it was being used for anything else.

silvercar

https://forums.moneysavingexpert.com/discussion/comment/82158321#Comment_82158321

From what I’ve seen it isn’t uncommon for families with money to provide some sort of stipulation on its use. (See above for comment on house deposits). One option is of course to say, we don’t want the gift if you are going to demand it back at a certain point. Of course, the risk is then that future gifts aren’t forthcoming.

Really it’s a pleasant situation to be in. She gets some PBs, so she will get some return on holding the money. Worst case it goes back to him at some point, better case will be your wife keeps it. If she does consider it a GWRoB, then the estate (not her) has a tax bill equivalent to it being held on the estate. If he outlives the gift for more than 7 years, without it ever being repaid, will anyone still hold any paperwork on it? It’s a little win/ big win situation. I can’t see a downside.

DRS1

Maybe he would understand if you told that a gift is not a gift if it has strings attached.

Saying things like "she is looking after his money for him" and "you will return it if I ask for it back" means the money is not a proper gift. It might be a loan. It might be a trust. Whatever it is it needs to be adequately documented so that questions like does it have to be taken into account in the distribution of his estate are dealt with. But maybe that would require FIL to rewrite his will (would that put him off the idea?) so that your BIL's share of the estate is higher than your wife's by the amount of the "gift".

There was a good idea earlier of sending him to talk to an adviser about estate planning and IHT. See if you can get him to see a STEP solicitor.