IHT - GWRoB - Complications

Grumpy_chap

OK, so the specified intent (PBs) is not contrary to PET and does not itself mean GWRoB.

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

In a way the PBs is a neat solution as it puts this money in a separate location. That was an issue when he gifted us some money in the past. Every time we did anything, he moaned that we were frittering away his money. It became restrictive to such an extent that we eventually gave the money back so that we could get on with living our lives and spend our money freely on whatever we wished. The separate PBs solves that as, if there is any comment of frittering away his money, we can simply point to the PB account and say "oh no, here it is".

We are of the view this is likely GWRoB and if it is assessed as PET or, eventually, ET, that is a bonus.

We can put the money into PBs and that keeps it separate so no practical concern there.

Any prize money seems like it is my wife's anyway as he never said he potentially wants that paid to him.

It only really leaves the "looking after my money" comment and potential request to repay on demand that makes it a possible GWRoB (instead of PET). From a practical perspective that will work anyhow as the money will be separate in PBs.

Maybe that's all the thinking we should do on this.

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.

StewedApple

The practical solution to this, as the other options sound as though they may cause distress to your father-in-law, may simply to be accept these monies, ring-fence them (and any subsequent payments) into a separate account.

This may have a short-term tax implication for yourselves, but it would be easy and clean to deal with as part of his estate when the time comes, and would leave you in a position to ensure you have dealt with the matter honestly.