MIL wants to give each grandchild a 6k gift, SIL says she cant

[Awks]

MIL has been at ours all Christmas and has been lovely. She's been in hospital recently and is ok now, 92 but still very well, independent in her own home with no intention of it being any different till she's "taken" her words.

She said last night that she'd like to give each grandaughter 6k as all 4 are getting to house buying ages and she'd like to make it a bit easier for them - that's lovely. But today, SIL says she cant as that would be seen as avoiding paying for a care home fee. MIL doesn't have any plans to go in one and has the cash plus a fair bit more if she needs care, so can anyone tell her she cant spend her money as she wants?

We don't want her to get into any trouble but she'll be gutted if she thinks she cant help her grandkids out. Does anyone have any experience of this?

Thanks

[Pibplob]

As far as I'm aware you can gift people 6k with no tax issues. She can do what she wants with her money. I'm sure someone more knowledgable will be along in a bit tho.

[eastlondoner]

It depends whether it is in any way foreseeable that she may need residential care in the future. This applies to several years in the future not just the next year or two. So does she have any health/ social care needs at the moment?

As an aside whether or not she would ever want to move to residential care is irrelevant to the question of whether or not such a gift would be seen as a deliberate deprivation of assets.

Your sister in law is very right to be cautious.

[MyBrilliantDisguise]

This is what the government website says:

You can give away £3,000 worth of gifts each tax year (6 April to 5 April) without them being added to the value of your estate. This is known as your ‘annual exemption’.

You can carry any unused annual exemption forward to the next year - but only for one year.

[Awks]

Gawd, poor woman - she's 92 so yes it is likely that she will have some needs/ or die in the next few years but she's living independently at the moment. She's just got to the age where she's watching her grandkids move out and start saving and she wants to help them.

Is there any proportion of assets she can gift - she's got a house and a fair bit in the bank and these gifts are quite a small proportion of her estate - how bloody unfair is it that she cant do something that would make her happy, now.

Anyhow this is all very helpful, thanks for replying - I appreciate it

[YesThisIsMe]

That’s just about tax though Disguise. SIL has a point that the local authority might see it as deprivation of assets for the purpose of care funding. They can look back for a few years, not just the period where you’re immediately planning to go in. However, as she says, she might never need to go into a care home. It also depends what her total assets are - if she has, say, half a million of available assets then she would be very unlikely to be calling on LA funding anyway. If she’s only got 40K in savings then that’s a very different kettle of fish.

The answer, I’d say, is to accept the money gratefully, put it into ring fenced savings for a couple of years and see what transpires.

[YesThisIsMe]

If she has enough assets that she’d be paying for her own care anyway for several years then the question doesn’t arise.

[PaintingByNumbers]

She can give as much as she wants, noone is stopping her. It might be an issue later down the line where you, whoever is the executor, pay inheritance tax on it

[Awks]

Thanks for that link Mybrilliantdisguise , so its 3k in total each year? Meaning she could gift each gk 750 this year and 750 next year within the regulations. God, she'll be gutted, she was so pleased with herself last night for doing such a lovely thing.

[MrsBertBibby]

The 3K thing is specifically about inheritance tax.

[Awks]

ok thats an idea yesthisisme she could maybe do that.

If she did this, she'd have assets that would keep her in a funded luxury top of the range care home for a couple of years. Surely that's bloody enough for and LA?

[Dox]

Asks. There is no law that says she can't give her money away.
If she does, and then dies and is in the inheritance tax bracket, they might treat those gifts as part of the estate for tax purposes. Still doesn't stop her doing it if she wants.
The other issue of care costs is similar in that they could decide to deem that she still has the money. Still doesn't stop her doing it if she wants.

[HamishBamish]

It's quite normal to want to pass some money to grandchildren, but it should be done carefully if she wants to avoid passing on the burden of inheritance tax. DH's Grandparents did this for a number of years, but there's a maximum amount you can give per year. I would tell her that it's a lovely idea but she seek advice and ensure she's looking after her own interests also.

[Mxyzptlk]

She could gift two years worth in the first year. (Tax year)

Up to 7 years from giving money, it is classed as still belonging to her (or a proportion of it is, depending how long a time has passed) when her ability to pay for care is assessed.

[Awks]

Right I understand now, the 3k is a red herring - inheritance tax is after she dies and is unavoidable. But if she needs a care home her assets would be sold to pay for that anyway so there wouldnt be any inheritance tax. Gotcha.

This is deprivation of assets issue? I just want to say, just bloody do it, it will give you such pleasure and we'll deal with any fallout if it ever happens that you run out of money for care home fees over it. Its likely never to happen as she's be in one over her dead body anyway.

[YesThisIsMe]

The IHT exemption also carries over from one year so she could use the 2015-16 allowance as well if she hasn’t used it, so giving 1,500 to each GC now and then 750 in April next year. Plus there are extra allowance for gifts on marriage if that applies to any of them - so if GC A is getting married then she could give them 2,500 and spread the annual exemption amongst the other three that year.

However she should get someone to do the sums on her IHT liability anyway - if her DH left everything to her then she may have the benefit of his IHT allowance as well as his own, which might make her estate’s liability negligible.

[JellyBabiesSaveLives]

Inheritance tax - she can use last years allowance, so she can give 6k now and then another 3k on 6th april.

But thats just the bit that won't be liable for inheritance tax if she dies in the next 7 years. She can give more than that, but if her estate is more than 325,000 then there'll be 40% tax to pay on the bit over 325,000 (including the money given away in the previous 7 years). So if she has that much, the granddaughters might want to put aside 40% of their gifts, just in case. Or the children might want to decide to pay any tax from the rest of the estate (and put that in writing)

If she's got more than £325,000, prob can give away 24k without worrying about care homes

[Awks]

^^ is so complicated. So there are 2 issues to consider IHT (if she dies) and care home fees (if she goes in one/runs out of money).

Ok. Thank you for all this info and advice, it's much appreciated. I'll ahve a chat with her but this will send her into a royal lather, understandably.

[Awks]

I don't think she's got 325k worth of assets, so all that's probably a moot point

[shouldwestayorshouldwego]

She can gift more but it won't be exempt from inheritance tax. If it will make her happy, the beneficiaries of her will are in agreement then why not accept the money and worry about inheritance tax later. The tax on the amount above £3k would be due at some point anyway if the estate needs to pay inheritance tax. You might suggest that she gives 3k this financial year (if she hasn't used the 3k allowance last year I think that can be added too) and another 3k in April which isn't too far away. That would give a total of 9k tax free. That is even assuming that IHT is due on the estate. Tax allowance from a deceased spouse can be added, plus 100k from each of the couple on their main residence. Comes to around £850k per couple.

[HurtyAtThirty]

Yyyyyyyyy

[HurtyAtThirty]

Sorry no idea why my iPad decided to have a wobbly!

[diddl]

If it was given, would GC hold some back in case there were tax implications?

That way she could just do as she wants with not having to be told/worry about possible implications.

[KirstyJC]

If she has a lot of money then she could get a live in carer and buy any equipment herself to avoid a care home completely - even if you are in bed and can't move you can still be cared for at home so long as you don't have large medical needs - and if they are really high medical needs she may be CHC funded anyway (ie NHS).

If she has lots of money and needs a care home then she will have to pay anyway - if she has over £23,500 (in England) she would be paying in full and would keep paying until she drops below this amount, and they would take the house value into account if there was no one else eg husband living there as well.

If she is 92, and has enough money in the pot to pay for about 5 years in a care home even with the gifts given, then I would say she has nothing to lose so go for it.

However if she has that much money then I would also suggest she go to a specialist financial adviser to make sure and also that she consider setting up Power of Attorney to look after it/her in case she no longer can.

[BubblegumFactory]

I’d just do it and not worry about the ifs and buts. My DM passed on money to me just before she died and there were no consequences. It was the most important thing to her at a terrible point in her life when she felt robbed of old age; she did not want to die.
There was no way I was going to waffle on about inheritance tax etc in her last weeks. She’d have ignored me and in any case was under the threshold.