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    • Rodders2409
    • By Rodders2409 3rd Jan 18, 1:12 PM
    • 38Posts
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    Rodders2409
    Rationalising recently deceased parents investments
    • #1
    • 3rd Jan 18, 1:12 PM
    Rationalising recently deceased parents investments 3rd Jan 18 at 1:12 PM
    Hello All,

    Not sure if this is the correct place to post...if not could someone point me in the right direction, many thanks!

    Sadly, mum recently passed away and dad is now looking to sort things out financially. I've had great feedback in the past from this site so thought I'd enquire on the variables we have in front of us with some better informed folks.

    They have a shared bank account that will be fairly easy to manage through, and will act as dads main account going forward.

    In addition there are a number of investments to consider which dad is suggesting he just 'cashes in' and passes the monies on to my brother and I. However, I think this needs some thought with regards to tax etc..

    The Investments are in a number of places...
    NS&I - Bonds / Savings / Premium bonds
    Prudential - With profits fund
    Halifax - ISAs
    Nationwide - ISAs

    ...they all need checking but probably come to a total of about 350K.
    In addition, valuation on the house is 350-380K.

    Obviously, dad will be living at home for the foreseeable future, but what would are the things to consider when looking at the initial investments, and then latterly the home when that comes to pass, with regards to tax efficiency etc...

    Many thanks for any pointers.
Page 1
    • trailingspouse
    • By trailingspouse 3rd Jan 18, 1:24 PM
    • 2,680 Posts
    • 4,369 Thanks
    trailingspouse
    • #2
    • 3rd Jan 18, 1:24 PM
    • #2
    • 3rd Jan 18, 1:24 PM
    Sorry for your loss.

    Assuming your father is quite elderly, both you and he need to be aware of 'deprivation of assets'. In other words, if he gives money away to you which he later needs to provide for his care, it's possible the authorities will come to you for the money.

    Often elderly parents are keen to give large gifts to their children. This is understandable, but not always wise. To be blunt, if he dies without needing to go into a care home, all his capital will come to you anyway. If he needs to go into care then he will need his capital to pay for it - so either way he should hang on to it.

    Why do the investments need to be moved? If they were in a reasonable place before your mother passed away, presumably they are still in a reasonable place now. The only ones you might need to think about are ones that were in your mother's name only.
    • Keep pedalling
    • By Keep pedalling 3rd Jan 18, 1:47 PM
    • 5,102 Posts
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    Keep pedalling
    • #3
    • 3rd Jan 18, 1:47 PM
    • #3
    • 3rd Jan 18, 1:47 PM
    If your mother left the bulk of estate to your father there are no tax issues to consider as the combined nil rates leave his estate well outside IHT territory.

    Although I would not recommend him giving the bulk of his savings away, it would not count as DOA as far as residential care is concerned as he would still have the house to pay for that, but it could apply for home care if he did not have sufficient income to pay for that.

    It seems most of his savings are in cash, which is going to be eroded over the coming years by inflation, so yes I would look at reviewing those, and probable with an IFA for that sort of sum.
    • Rodders2409
    • By Rodders2409 3rd Jan 18, 2:25 PM
    • 38 Posts
    • 11 Thanks
    Rodders2409
    • #4
    • 3rd Jan 18, 2:25 PM
    • #4
    • 3rd Jan 18, 2:25 PM
    Thanks Trailing & Keep,

    There are a few investments that are in mums sole name, and dad as the main beneficiary, maybe has the option to keep them going I guess or cash them in...is that correct?

    If he does cash them in then he could re-invest somewhere else or decide to pass on the monies to my brother and I. However I get the point with ongoing care costs and the potential for challenges to the final estate if he needs major care in the future.

    That said I would have thought that the house would cover that eventuality.

    My concerns were based around any tax implications should he decide he'd prefer to pass on mum's sole investments to us both. (approx total 100K).
    • martinsurrey
    • By martinsurrey 3rd Jan 18, 2:47 PM
    • 3,340 Posts
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    martinsurrey
    • #5
    • 3rd Jan 18, 2:47 PM
    • #5
    • 3rd Jan 18, 2:47 PM
    Assuming your father is quite elderly, both you and he need to be aware of 'deprivation of assets'. In other words, if he gives money away to you which he later needs to provide for his care, it's possible the authorities will come to you for the money.
    Originally posted by trailingspouse
    Deprivation of assets is often thrown around, but is rarely understood.

    The authorities can ONLY consider a gift to be a deprivation of assets if at the time of the gift the giver had an immediate foreseeable need for care.

    just getting older isn't a foreseeable need, so unless the OP's father has, and knows about, some specific ailment that means care WILL be needed in the short term, he can do as he wants with his money.
    • Linton
    • By Linton 3rd Jan 18, 5:58 PM
    • 9,395 Posts
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    Linton
    • #6
    • 3rd Jan 18, 5:58 PM
    • #6
    • 3rd Jan 18, 5:58 PM
    Even if there isnt DoA extra money for later old age shouldnt be given away too readily. Most people dont go into care homes. What is far more common is to have care in one's own home. Council home care can be quite restricted. If one has the money one can choose exactly the care one needs and with luck avoid going into a care home at all.
    • xylophone
    • By xylophone 3rd Jan 18, 6:53 PM
    • 25,589 Posts
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    xylophone
    • #7
    • 3rd Jan 18, 6:53 PM
    • #7
    • 3rd Jan 18, 6:53 PM
    https://www.gov.uk/government/publications/inheritance-tax-main-residence-nil-rate-band-and-the-existing-nil-rate-band/inheritance-tax-main-residence-nil-rate-band-and-the-existing-nil-rate-band


    Your mother's will left the assets in her sole name to your father?

    Does he wish to consider a Deed of Variation so that they pass to you and your brother instead?
    • Robin9
    • By Robin9 3rd Jan 18, 7:14 PM
    • 2,662 Posts
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    Robin9
    • #8
    • 3rd Jan 18, 7:14 PM
    • #8
    • 3rd Jan 18, 7:14 PM
    Premium Bonds have to be cashed in.
    Never pay on an estimated bill
    • Rodders2409
    • By Rodders2409 4th Jan 18, 8:58 AM
    • 38 Posts
    • 11 Thanks
    Rodders2409
    • #9
    • 4th Jan 18, 8:58 AM
    • #9
    • 4th Jan 18, 8:58 AM
    Thanks to all for the info so far...

    It seems that DOA may not be a fasctor then, as Dad is old but quite able to look after himself as far as we can see at the moment.

    Therefore, if he chooses to close mums (only) investments and pass the proceeds on to us then he's OK to do so without penalty to himself or to us, through any form of taxation....is that correct?

    If we wanted to, we could put the funds directly into our pensions etc...?

    To complete the questions, without wanting to tempt fate, is any of my Dads estate (now) eligible for inheritance tax as it stands today (approx values above in previous post) or would we be liable for Capital Gains Tax once his estate passed over?

    Thanks.
    • getmore4less
    • By getmore4less 4th Jan 18, 10:15 AM
    • 32,192 Posts
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    getmore4less
    Premium Bonds have to be cashed in.
    Originally posted by Robin9
    They(mums) can be held for a year collecting prizes.
    • getmore4less
    • By getmore4less 4th Jan 18, 10:21 AM
    • 32,192 Posts
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    getmore4less
    In many cases a DOV away from a spouse is not the right thing to do as this just reduces the transferable nil rate band.

    A PET is often better as it has a chance of dropping off the estate if the survivor lasts 7 years.

    As the current total estate includes a substantial property element it is in the range(close enough to 1m) where some IHT planning across multiple generations should be considered.


    You need to consider capital/investments along side the income stream.
    • Rodders2409
    • By Rodders2409 4th Jan 18, 10:33 AM
    • 38 Posts
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    Rodders2409
    Thanks Getmore4Less...but I'm going to need some handholding through you're last post

    What's DOV?....
    What's PET?...
    • kidmugsy
    • By kidmugsy 4th Jan 18, 11:04 AM
    • 10,887 Posts
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    kidmugsy
    If the ns&i "bonds" include index-linked savings certificates he should probably just get them re-registered in his own name. They are an excellent deal and irreplaceable.

    What would you two do with 100k between you? Would the 50k each let you clear debt, or buy property, or let you exploit use-it-or-lose-it investments e.g. pension contributions, or LISAs, or .....?

    Your father has the opportunity to keep the ISA money within ISAs if he wants to.
    Free the dunston one next time too.
    • Rodders2409
    • By Rodders2409 4th Jan 18, 11:47 AM
    • 38 Posts
    • 11 Thanks
    Rodders2409
    Yes, there's approx 23K of Index linked NS&I investments, so we should just transfer to Dad then.

    My guess is that we'd probably put it into pensions as we have 3 yrs of allowance to use up I think.

    Do you think Dad could keep the ISAs going in his name now?
    • xylophone
    • By xylophone 4th Jan 18, 4:51 PM
    • 25,589 Posts
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    xylophone
    Do you think Dad could keep the ISAs going in his name now?
    https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/418147/Spousal_TIIN_final.pdf

    Example

    https://www.nationwide.co.uk/support/support-articles/manage-your-account/isa-inheritance/isa-inheritance-about
    • kidmugsy
    • By kidmugsy 4th Jan 18, 5:11 PM
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    kidmugsy
    Do you think Dad could keep the ISAs going in his name now?
    Originally posted by Rodders2409
    As xylophone's links explain the method is indirect but that is the effect of it. The gist is that he withdraws the assets from your mother's ISAs and is allowed to open extra ISAs for himself that are big enough to accept that money over-and-above his normal ISA-subscribing activity.

    Naturally he might choose not to, for instance if he'd rather see the money contributed to pensions by each of you. Personally, in his shoes I'd be reluctant to give a lot of money away. What if one of you goes bankrupt, or had a messy divorce, or turns into a gambler, alcoholic, or druggie? Still, it's his money. He must do what he thinks best.
    Free the dunston one next time too.
    • Rodders2409
    • By Rodders2409 4th Jan 18, 5:37 PM
    • 38 Posts
    • 11 Thanks
    Rodders2409
    Gambling alcoholic....has someone been talking ?
    I understand the point made, but generally occupy the other end of life's spectrum with too many active pursuits and not enough time !!

    If he can transfer easily into another ISA and the performance is good then that sounds like a plan.
    That said wouldn't there be be better returns with additional Pension contributions in terms of tax etc?
    • kidmugsy
    • By kidmugsy 5th Jan 18, 12:18 AM
    • 10,887 Posts
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    kidmugsy
    That said wouldn't there be be better returns with additional Pension contributions in terms of tax etc?
    Originally posted by Rodders2409
    The big benefit of pensions would be if (i) contributions attracted further employer contributions, or (ii) contributions could be made by salary sacrifice, or (iii) the son concerned could thereby avoid higher rate income tax.

    If your father's income is secure (e.g. final salary pension and state retirement pension), and if he has a fear of future cuts to the tax-exempt amount for inheritance tax, and if he'd enjoy seeing the use you two made of such a gift, then he might not be taking too much risk in gifting money to you. It's his shout.

    By the way, there are several other things he could consider. (i) For instance if he's got the old-style SRP, and if he's not too old for the idea to be unattractive, he could consider suspending ("deferring" in the jargon) his SRP for a few years. That can be a wonderful investment. (ii) He could make a 3600 gross pension contribution every year, knowing that if he never draws from the pension the money can pass to you two (or your children ...) without its entering his estate and being potentially subject to inheritance tax. (iii) He can gift you 3k p.a. between you exempt from IHT (6k in the first year, using unused exemption from the previous year). (iv) If he has surplus income he could make regular gifts out of income to you that would be free of IHT.

    At the moment fear of IHT might be groundless, but who knows what a Corbyn government (or some other) might do? For example I find the current treatment of the principal private residence bonkers in spite of the fact that my descendants might do well out of it.
    Last edited by kidmugsy; 02-02-2018 at 7:47 PM. Reason: removal of an erroneous comma
    Free the dunston one next time too.
    • martinsurrey
    • By martinsurrey 5th Jan 18, 8:55 AM
    • 3,340 Posts
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    martinsurrey
    Thanks Getmore4Less...but I'm going to need some handholding through you're last post

    What's DOV?....
    What's PET?...
    Originally posted by Rodders2409
    DOV is a Deed Of Variation - it a legal letter that amends the contents of a will for tax purposes, so you could make it so that the cash went straight from your mums estate to you, rather than passing through your father first.

    now that nil rate bands are transferable it is NOT a good idea to do this in your case.

    PET is a Potentially Exempt Transfer - If someone gifts someone else a capital sum of money (so money not from current earnings), that sum is a PET. If the person who gives the gift dies within 7 years of giving the gift, some of the value of the gift is added back to the value of the deceased's estate for inheritance tax purposes. The amount added back decreases over time ( from 100% in years 0-3 to 20% in years 6-7).

    IHT = inheritance tax

    in your fathers case, if he inherits your mothers entire estate, he can gift you as much as he wants, and also inherits your months entire 325k IHT allowance. If he dies within 7 years only a portion of the gift will be added back to his estate to calculate if any IHT is due, this is the most efficient simple way of using the inheritance tax system.
    • newatc
    • By newatc 5th Jan 18, 9:13 AM
    • 248 Posts
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    newatc
    Sorry for your loss Rodders.

    As far as I can see there are no tax implications in your father giving his children gifts (effectively inheritance upfront) and there obviously benefits for you and your brother. He is the key person in this decision and if that makes him happy at this difficult time (and I can see why it would) then I would gently go along with the idea .
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