Inheritance tax, gifts etc

[Mrspopper]

It’s long. I’m stressed. Thank you for any advice.

DH mum sold her house and moved in with us 6 years ago. She funded a loft extension with bathroom which she lived in for 4 years and then her dementia was too advanced for us to manage and she lived in a care home for two years until she sadly died recently.

DH brother is saying he wants equalisation as we have profited from loft extension

we are just within inheritance tax window as loft was done 6 years ago.

Should the money for loft be counted as a gift or quid pro quo for caring we did?

thank you for kindness but factual replies
so hard seeing my husband so worried

What does her will say, who paid for the care home, was there any discussion at the time when she moved in, did she ever give brother the same amount as you were given for the conversion.

Watching with interest as we have similar situation …

How much did she give you, how much caring did you and his brother do, what have you done with the loft for 2 years. When she gave you the money was it as a gift or for her benefit. What's your dh particularly worried about, is it because he may need to pay iht..

Will says 50:50 of her assets between the this brothers. We did all the care, brother barely saw her. Just don’t know if he has a claim over our house as she paid for loft, she couldn’t have lived with us without this as house was too small.
just thought we were doing the right thing by having her with us and didn’t really think about when she died. Stupid of us in hindsight

Funny that the brother didn’t seem to think of it then either back when she needed care

If the Will doesn't stipulate the money given to you to alter your home to enable you to provide accommodation and care for your MIL should form part of your eventual inheritance, it's hard to see how DH's brother can make any claim on it.

How you deal with his demands really depends on your current relationship and the effect of a dispute on your future relationship with him.

His reaction isn't that unusual; relatives demanding their share of a deceased's person's estate based on nothing more than being "family" are almost a given.

Firstly ignore the brother, the will says 50/50 of assets when she died so he is not entitled to money she spent before then.
It is likely that the money given for the lift conversion would be treated as a gift for IHT but I think it tapers over the years so if it was 6 years ago the IHT may not be that much.
There may also be some argument that she enjoyed use of the lift for a number of years but you would probably need tax advisor co firm.

IHT rate on gift between 6-7 years ago is 8%

There’s no relationship with brother anymore. He accused us of financial abuse, took us to court and didn’t win his case. He’s just awful. Still a funeral to go through and feels likes all he cares about is money.

If your MIL had enough by way of assets to be in IHT territory, even after 2 years in a care home which she presumably paid for, then the estate is indeed worth a great deal.
Did she pay you rent when she lived with you? How much did she give you for the extension? How much money is left in her estate?
It’s pretty common for people in your BILs situation to feel aggrieved if he thinks he’s been short changed. He does have a point - you’ve benefitted from extending and improving the value of your home.

I don't think you owe the brother anything, your care for four years was a fair exchange for the money she invested into your house. She chose to spend that money so it does not form part of the 50/50 split as that is for the assets she had at the date of death. It would be interesting to compare the cost of 4 years of care home fees compared to the amount she paid for the conversion.

she didn’t pay any rent or bills and we provided all food and care
400k in her estate

If the estate is worth £400k and she didn’t leave a property then potentially there is IHT to pay but what about your df? If your parents were married and he has already passed away and he didn’t use up all his IHT allowance when he died (no IHT due if one spouse dies and the family home is owned jointly as it doesn’t change ownership) then your dm can have the unused portion of his IHT allowance.

that makes a few assumptions - apologies if it doesn’t apply for you - and it doesn’t deal with your actual questions but it’s relevant to he aware of

also just follow the will & no more than that it was an incredibly kind thing to do letting your dm move in with you and caring for her. I hope you find some peace. Families can be incredibly difficult at times. Once the funeral is over hopefully you can put it behind you and not have contact with him any more x

That would be a firm no to giving him a penny beyond 50% of assets at death.

I would tell the brother that the conversion paid for his Mum’s housing and care for 4 years, which would have cost £xxxxxk at care home rates.

What a horrible man. I cannot imagine being anything other than grateful to my sibling for caring for my Mum, and I cannot imagine begrudging a penny of the conversion to my sibling. Or receiving £200k and being greedy for more!

Your MIL’s will is her will. That’s that.

Everything depends on the particular circumstances.

For example, if his parents were married and his father died first and left everything to his mum then she also got all his unused IHT allowances.

This means that your mum could pass on at least £650k without paying IHT. Or up to £1 million depending on the exact circumstances of the value of the house when it was sold (it all gets very complicated).

If his mum was divorced then she could pass on £325k without paying IHT and also up to an extra £175k (so £500k in total) depending on the value of the house when she sold it and the amount that she passes on to you.

Did your Mum actually pay for the loft conversion, in which case it’s her asset maybe to be included in her estate, or did she gift you the money which you spent on the loft conversion? The detail always matters.

She paid for it directly from her bank as we thought that was the best thing to do x

Oh dear! That really gives weight to her having a legal interest in it and perhaps part of her estate if brother wants to challenge. I think you need to be consulting a solicitor to check the position.

What does his brother want and what's your dh worried about. How much did the loft conversion cost, does he want whatever that cost now,

Being pragmatic and bearing in mind the potential huge cost of legal challenge and defence, probably just best for Ops DH just to offer to pay his brother half the cost of the conversion out of his half share of the estate, then they’re equal again.

See a solicitor for advice, I would say will is only applicable to the Estate re assets at the time of her death, not retrospectively. Yes you have benefited by the loft, but that was necessary to provide her with a home. The brother does sound unreasonable, but nothing surprises me with families anymore, the greed and entitlement is unbelievable with some people. Try not to worry about it, but seek legal advice. Do you have legal cover on your home insurance?

Give him an invoice for 24 hour care with you and food, room and board. It’s strange that he didn’t say anything when you were prepared to look after her and now he’s she’s dead he just wants some money. Scumbag.

You would also need to list her income with pensions, any benefits either were claiming. They both benefitted, she got a new loft conversion, her mum got free care in exchange for paying for the loft, we don't know what alternatives were sought at the time or how much the conversion has added value to the house.

You need proper legal advice. HMRC may argue that the loft conversion money was a gift with reservation of benefit since she profited from it by living with you in the home and did not pay market rent. It would therefore not benefit from taper relief for IHT purposes.