giving away money/property before death

markcal8888

Hi All,

I have been asked by my parents to post this question.

My folks have property worth about 180k and cash/shares etc worth 110k. What is the best way to give the assets to my sister and I. My folks biggest fear is that if they were to go into care then the houses would be sold and all there assets used by the council for the cost of care. My dad's worst fear is the council care costs eat up nearly all the assets and all the hard saving he has accomplished over the years will not be passed on.

thanks

Primrose

This is a dilemma for many older people and the situation is not simple because if your parents give away too many of their assets and then need residential care, Social Services will check up and if large chunks of their assets have disappeared they will have been deemed to have deliberately divested themselves of money which should have been used to pay for their care fees. They can, of course, legitimately each give away £3000 every tax year if they can afford to, so there are still a few days left in this tax year to use up £6000, and then they could give another £3000 each in 2008-9.
You don't say what age your parents are, and how close they might be to possibly need residential care.
The other thing everybody needs to address is that presumably they worked hard all their lives to have a comfortable old age. If residential care is needed for one or both or them, would they rather use their hard earned savings to be placed in a nice residential care home or have no money and be placed in a grotty one stinking of urine and with no facilities for residents because there is no money available for them to have a choice? And you and your sister have to ask yourselves this question too. My parents home had to be sold to help meet their care home fees. It was not what they wished either but life sometimes bring unexpected disasters and being without any money to ease your last years is not a pleasant prospect. If your parents are a long way off from this possible scenario, possibly they could pass some funds to your and your sister and you could hold it in your names but on their behalf so that if they did find themselves in the Care Home Scenario much later down the line, you could use that money towards their care. (provided your own marriages don't break down and your have partners who try and make a claim for their share of the money).

loulou41

markcal8888 wrote: »

Hi All,

I have been asked by my parents to post this question.

My folks have property worth about 180k and cash/shares etc worth 110k. What is the best way to give the assets to my sister and I. My folks biggest fear is that if they were to go into care then the houses would be sold and all there assets used by the council for the cost of care. My dad's worst fear is the council care costs eat up nearly all the assets and all the hard saving he has accomplished over the years will not be passed on.

thanks

What I have done for my adult children is to give them various sum of money over the years? This will not look suspicious as it has been done over the years not suddenly. Currently, any spare money I am putting in their account as spare income which I understand I can do as long as I do not deprive myself. I have also used the £3000 allowance I am entitled to give and several small amount of £250 by standing order. Sometimes, I withdrew some money approx £500 in cash and put it in their account. This I wanted to do for them, they do not expect or ask me to do this. I own my house outright and they have been told not to rely on this house, and if needs be it has to be sold in my old age to pay for care.

I will be 60 this year. Your parents can do that it all depends whether they will need care in the near future. I intend to keep about 25k for emergency and the rest I am giving away to my children. Hope this will help.

takoo

Please check this but regarding gifts of £3000 each year. If during the last fiscal year (2006-2007) no gifts were made I understand they can be carried over to the following year. That becomes £6000 each (2007-2008) before 6th April and £3000 each from that date (2008 -2009) (assuming £3000 is correct).

Takoo

EdInvestor

It is not necessary to give the money away now to avoid it being used to pay for care.The posts above refer to inheritance tax avoidance strategies which are not relevant.

What you need to do is

1)Divide the cash and investments ssets half and half so they are listed under one name only, ie 56k in each name.

2)Rearrange the ownership of the property into "tenants in common" on a 50/50 basis, not joint tenancy, with each partner leaving his or her half in trust for the children.

3.)Set up the trust so that the parents still have control over the assets while either of them is alive. The trust structure also means there is no capital gains tax bill for the children when they sell.

Details here:

http://www.tenminutewill.co.uk/main.cgi?d_ref=google&d_ref_2=ppt&page=51

If you do this the house will be completely beyond the council's reach.They might be able to take half of the investments owned by the individual - but it is also possible that your parents might want to buy a "care annuity" with that money, so as to be able to control the care they receive independently of the council if necessary.

sunshine62_2

Although not well versed in finacial matters, i have been able to follow and understand most of the discussions and am busy learning along the way. Thank you to all who contribute.

What is a "care annuity", and how is it best used as a financial planning tool? My husband has Parkinsons so care will be issue in the near (2-3 year) future. Many thanks

treliac

EdInvestor wrote: »

........ with each partner leaving his or her half in trust for the children.

There can be pitfalls and IMO it is worth having good legal advice on this.

For example:

* There could be a problem should one or more of the children divorce as any ex-spouse to be will own part of their parents-in-law's assets and could want their share immediately.

* If any of the trustees become bankrupt, the property may have to be sold, as one of their assets, to pay their debts.

Although good in principle, it is essential to be fully aware of the implications and how they relate to your own particular family circumstances as there are a number of potential and risky 'unknowns' in leaving assets in trust to family members.

margaretclare

sunshine62 wrote: »

Although not well versed in financial matters, i have been able to follow and understand most of the discussions and am busy learning along the way. Thank you to all who contribute.

What is a "care annuity", and how is it best used as a financial planning tool? My husband has Parkinsons so care will be issue in the near (2-3 year) future. Many thanks

'Immediate needs annuity': http://www.sharingpensions.co.uk/annuity_immediate_needs.htm

The other thing to think of is: make sure your husband and parents are claiming all you're entitled to. Attendance Allowance is a possibility: see http://www.direct.gov.uk/en/DisabledPeople/FinancialSupport/DG_10012425

HTH

EdInvestor

treliac wrote: »

There can be pitfalls and IMO it is worth having good legal advice on this.

True

* There could be a problem should one or more of the children divorce as any ex-spouse to be will own part of their parents-in-law's assets and could want their share immediately.

No, because the property share is not owned by the children at this point.

* If any of the trustees become bankrupt, the property may have to be sold, as one of their assets, to pay their debts.

Also wrong AFAIK: the trustees do not own the property they simply administer the trust,so their personal status is irrelevant.The surviving parent will normally be a trustee.

treliac

Both the points I have expressed were as expressed to me, my husband, two siblings and their spouses in relation to my own mother's estate.
Her solicitor is one of a practice that specialises in inheritance planning and provides seminars that are hosted by Age Concern, Mencap, etc.

We are a close and trustworthy family with no reasons, particular to our own relationships or circumstances, that prompted such a discussion. I am passing on the information we were given.

If you think about it, the reason that money put into trust for others, is not taken into consideration by local authorities is because that money does no longer belong to the donor - they merely have a life interest in it within the terms of the trust. Other legal situations such as bankruptcy may take precedence. A solicitor would clarify.

Being a trustee for administration purposes does not necessarily make you a beneficiary of the trust.

sdooley

EdInvestor wrote: »

---Bankruptcy and Divorce of the children could affect the parent's security.
No, because the property share is not owned by the children at this point.

Ed, the OP is correct, if the children are beneficiaries of the trust, their trustee in bankruptcy and/or ex-spouse will have an additional claim against the child based on the value of this right - and if the trust is a bare trust could call for the property to be sold to them.

Also, trusts established in contemplation of care home fees being due can be ignored by local authorities when assessing the fees. There is a manual on much of this called CRAG.

Re-organisations of wealth using trusts can be advantageous but can also trigger tax liabilities that would not have been there if there was no action taken.