IHT - GWRoB - Complications

QrizB

Does the ability for FiL to call upon the funds at any time mean GWRoB?

Yes, that's the Benefit that's being Reserved.

Grumpy_chap

https://forums.moneysavingexpert.com/discussion/comment/82158406#Comment_82158406

All very good comments.

We tried to explain to him about the phraseology he was using and the GWRoB. He would not listen and simply denied that there was any such thing as GWRoB.

The idea to see a professional Estate Planner is a good one but he is very stubborn and won't take advice from anyone.

Adjusting the Will is not an issue as we understand he is gifting an equal amount to BiL. Except BiL has said to make the gift directly to his three children (Fil's Grandchildren, our nieces and nephew) to support them with house deposits. We actually said it would be better to just give a third of the total each to the Grandchildren (our nieces & nephew) for meaningful house deposit but FiL responded with "I will not be told who to give my money to". He has always been very stubborn and getting more so.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/82158399#Comment_82158399

As far as the usage is concerned you are right. However with these gifts from Bank of Mum and Dad for house deposits, you have to sign a document for the mortgage company and the conveyancer, that this is an out right gift and you understand you have no rights on the property.

So 100% clear it is a PET.

silvercar

https://forums.moneysavingexpert.com/discussion/comment/82158430#Comment_82158430

Sometimes people don’t get mortgages, the gifted deposit is to help them buy without a mortgage eg to buy an unmortgageable property that they intend to rebuild or refurbish.

Dead_keen

Roy Jenkins said that what is now IHT is

…a voluntary levy paid by those who distrust their heirs more than they dislike the Inland Revenue.

Your FIL seems to have worked out what I side of the distrust / dislike fence he is on!

DRS1

https://forums.moneysavingexpert.com/discussion/comment/82158430#Comment_82158430

I did wonder, if FIL was going to sign such a document for the nephews and nieces, whether he could be asked to sign a similar document for the OP's wife. Then I looked at a template for a Deed of Gift here

Deed of gift template (free, UK)

and thought maybe FIL would not be happy signing such a thing.

I would have thought the document could just consist of clause 1 (which might make it more palatable) but that page does explain why the other clauses are in there.

If FIL did sign such a document then no matter what he may have said about getting the money back later that document would be hard evidence that the gift was a gift. The written evidence would override any oral evidence. And the date of the deed would be the start date of the 7 year period for the PET. Any payments the OP or his wife might make down the track to help FIL out with care home fees or whatever would be an entirely separate matter (which could perhaps be documented as loans which could be repaid out of the estate after FIL's death).

The risk is that the deed of gift and any loan documents could be seen as a sham designed to hide what was really going on.

Dead_keen

The risk is that the deed of gift and any loan documents could be seen as a sham designed to hide what was really going on.

That risk seems real with these facts. IHT legislation uses "bona fide" possession and enjoyment. Signing a piece of paper with everyone knowing that if the FIL wants the cash back then he will get it is not bona fide enjoyment of the cash. Deliberately signing documents that purport to mean something else will put the executors in a tricky position (Google tax penalties for deliberate behaviour, HMRC deliberate tax defaulters list).

silvercar

I seem to be a lone voice here, but my take on this is:

Tax is based on facts. Assuming your wife accepts the money and buys premium bonds with it. Then one of the following happens:

(A) 7 years pass before FiL passes away, FiL never asks for the money to be returned. The PBs sit in wife’s account, no-one searches records beyond 7 years. The gift is outside his estate.

(B) FiL passes before 7 years have elapsed since the gift, but FiL has never asked for the gift to be returned. The money can be seen in his bank accounts going from him to your wife, with no matching return of funds. The gift was a PET.

(C ) FiL makes the gift and at some point needs and requests the money back. The money is back in his estate, though noting that chances are he asked for it back because he needed it, so it could well have been spent and therefore outside of the estate.

In all these scenarios, it’s the facts that speak for themselves, no bits of paper filed away, no conjecture on what intentions may have been. Just facts based on what actually happens. Keeping it simple.

Grumpy_chap

Yes, we are going to accept the money and buy the PBs.

We won't request statements or signed documents about being a gift or whatever as that will just cause upset.

That achieves the money being ring-fenced and clearly separate as my wife does not currently have any PBs.

We will pay the money back if requested.

We will assume that the money is subject to GWRoB rules and IHT when the time comes.

If we can find an interpretation that aligns with what Silvercar has suggested then that will be a "win".

Grumpy_chap

OK, so we decided to accept the money and buy the PBs and not to mention the risk of GWRoB any further as FiL robustly denied that there is any such concept as GWRoB and therefore it cannot apply. It was not worth that discussion / argument.

We decided not to open the conversation about prize money. The comments made in this thread seemed helpful in that regard.

He paid the money across this week and asked my wife to let him know when we had opened the PB account. PB account opened online this morning so my wife called FiL to let him know the deed was done.

In that conversation, FiL said he would like a report each year of how much prize money has been won so that he can decide what he'd like to do with it.

Now - I assume it is likely - if the prize money is just within normal probabilities, he will likely just say we can keep that amount to do with as we wish. That would be a series of annual gifts, possibly they'd be "gifts out of excess income" or below the annual limit on gifts (£3k) exemption. It still leaves open the awkward outcome of a large prize. Hopefully we simply won't win a large prize.

Does this all become a further pointer towards GWRoB rather than a simple, unencumbered gift?