Mum wants to give me money from house sale - tax issues?

[taxquery]

Wonder if anyone could help me out with some advice. My situation is as follows: Mum in nursing home, father died last year - family home finally sold last week. After paying the equity release company a third of the property proceeds, Mum is left with approx £120k - this is the sum total of her assets as she has no savings and just a state pension. She wants to give each of her 4 children £5k. I understand about "deprivation of assets" and that she can't simply gift her children the entire proceeds of her estate but would a sum of a total of £20k out of a pot of £120k be frowned upon and be deemed "deprivation of assets"? Also, would there be any tax implications for ME in receiving this amount of money (I've been at SAHM for 7 years and don't claim any other benefits other than child benefit).

We realise that Mum will now have to use this money to pay for her care until it dips below a certain threshold and that we will have to backdate that to the day that Dad died. Will be meeting with relevant people from social services to sort all that out.

I've been on the Inland Revenue site but got bogged down in IHT issues which I know don't really apply to this case. I thought I would try and see if anyone on Mumsnet had any answers - it's my first port of call on most things! (am a regular namechanger BTW)

A cash gift doesn't count as income for tax purposes and her estate is too small to qualify for IHT. When my grandmother was in a similar position of going into a nursing home she had a modest amount saved after selling her house a few years earlier. She had never claimed any benefits and had never declared her income or savings, preferring to keep that information private. The advice from the social worker was that it was up to the HMRC to get the information.... and that we, as her family, should not leap in to declare it on her behalf. Since HMRC were not about to demand a declaration from a 97 year-old woman, nothing happened, her care-home fees were covered, and she kept her modest savings intact.

So all I would say is be very wary about what information you give and to whom. Honesty is not necessarily the best policy and if you're given any advice on how to make the system work to her advantage, take it.

Thanks CogitoErgoSometimes - quite bold advice but I guess slightly different in that your Grandmother was 97. My Mum is 84. My siblings think the same as you and I am the awkward stickler one who wants to make sure everything is above board and legal (possibly motivated by the fear of being caught out and made to pay the price later rather than any moral high ground?!)

I was just of the mind that the local authorities have major powers to claw back any money if they think that there has been any deprivation of assets. I know we are not talking about carving up her entire estate between ourselves but I would rather know now whether this gift would be deemed allowable/reasonable.

I never expected to inherit anything from my parents but won't be turning down a gift of £5k if my Mum wishes to give it.

Have a look here

I think it falls into a PET (potentially exempt transfer) so if she lives more than 7 years no IHT will be payable. She can gift £3k per year tax free.

@SazZ... IHT and PET etc only applies to estates over £325,000.

@tazquery. My late grandmother frequently gave the family gifts of several thousand at Christmas and, because she never made any claims for anything based on her income, there were no come-backs. My Dad felt the way you do about the non-declaration but that was the advice we got from the social worker and it proved to be sound. I think local authorities and the tax-man are not at all keen to be seen as coming down hard & demanding money from sick elderly ladies.

Like I say... take advice from where you can get it but try not to feel obliged to reveal more than is strictly necessary.

Ah, ok. Sorry!

bump

Me again. Well my Mum gave me and my kids a total of £5k. Felt a bit odd taking it but she was insistent - thought it was a one-off payment. However, my sister (who now has Power of Attorney) has just informed me that my brothers have taken "their" £5k for this tax year and I can do the same.

Now we've established that we don't have to worry about Inheritance Tax as Mum only has about 100k BUT I am concerned that if each family member takes £5k each tax year (total of £20k per year) this will be considered as "deprivation of assets". I also have read that you can "gift" a total of £3k a year - so a sum of £5k EACH exceeds this hugely.

Anyone know the situation? I hate to be the bearer of bad tidings for the rest of my family (I have advocated honesty and was insistent that we declare the fact that Mum has sold the house and has the proceeds - the first thing my Mum's social worker said when my sister declared this was that she should have kept her mouth shut about it and they'd be none-the-wiser!)

My instinct is to not take any more than £750 per year off my Mum if she wants to give it. I can't see that my siblings will be happy with me suggesting they do the same. I think they think they can take £5k every year until she gets down to the £23k savings threshold (which won't take long with her paying fees of £450 a week plus giving £20k a year to her children)

If anyone has any experience of this I would be glad to hear it!

"deprivation of assets" only affects estates over the IHT limit
the rules are to stop parents giving tens of thousands to all and sundry on their death beds and avoiding huge chunks of IHT.
In your case there was never going to be any IHT
so there can be no tax avoided
and if your Mum cannot make better use of the money than to see you smile, take it and enjoy.

if you need to get her savings down to the threshold, take 10k
but remember that you may need to support her if she lives a long time in the home
it may be worth the one with power of attorney reminding each of you that having helped youselves you might need to help her back

worry about your mum not the tax bods

Who's paying her care home fees?

You don't need to worry about inheritance tax - but I would be finding out about care home fees etc - as I thought the sale of the house would go to paying her fees until she has less than (I think £30k).

Cognito
Wish I shared your faith in the tax man's reluctance to hassle elderly ladies.
Mum is 86 has has money in a five year ISA. As she doesn't get the interest until the end of the period, she didn't include it on her tax return (which she still does herself!!). She had a letter wish she felt to be most intimadating, saying that HMRC has information that she hasn't declared all of her income, and to think hard about what she might have missed. She really panicked, feeling guilty, although she'd done nothing wrong! Fortunately I was around to talk to them and ask what the information was, and apparently Halifax had informed them of the £100 or so interest she had 'received', although it wouldn't be available to her for another 5 years. Rant over!

OP - What about taking your money but putting it in an ISA or something, so that it's there if you need it for your Mum, but it's out of her name? Just a thought.

This appears quite helpful but not specific. Note this is to do with the council paying care home fees, nothing to do with HMRC or tax (because I presume the income from the £120k doesn't turn her into a tax payer if she isn't already - that would depend on her pensions etc).

Personally I would not want my parents to give away all their money so they were dependent on the council to pay the care fees - as that seems to take away quite a lot of choice from the individual.

cleanandclothed thanks for that link I have sent them an email. ajandjjmum sorry to hear about your Mum being hassled by HMRC - that's appalling.

I am more concerned by the powers that the local council has to claw back money from any assets/capital someone has if they think "deprivation of assets" has taken place in the 7 years prior to an elderly person's death. As far as they're concerned it looks like my Mum has enough savings to fund herself for another 4 years. If my family get given money and she ends up only self-funding for another 2 years won't they question what has happened to all her savings??

My Mum is completely uninterested in the money BTW. We talked about moving her to a BUPA home recently but she says she's OK where she is and doesn't want to move. She has no wish to spend her money on anything. But I still feel uncomfortable taking any money from her especially if we are not technically entitled to it.

There's a few things confused here, so here goes:

• deprivation of assets has nothing to do with IHT, it only relates to care home charges which are nothing to do with HMRC
• £125k is about 1/3 of the IHT threshold so forget all about it
• genuine gifts, even if paid regularly so they are like an income, do not affect tax or benefits
• "potentially exempt transfers" and the "7 year rule" relate only to IHT so forget about them
• Age UK provide a good leaflet on the deprivation of assets test

HTH

thanks MrAnchovy have just read that leaflet on the Age UK site and am still befuddled. I understand that we don't have to worry about IHT and PET etc. I guess I am wondering who, if anyone, has any say in what my mother can give each of her offspring on an annual basis.

The last thing I want to do is fall out with my family over this. I just can't help but feel uneasy and would rather not take anything

BTW I'm taxquery in case you were wondering!

I think £5000 a year is a bit much for a birthday present, more like £50 & as your sister has power of attourney she might get asked some hard questions. Maybe show her the article.

There could well be a problem when your mums ability to self fund ends and she then asks for assistance with funding. If each member of the family have been taking £5k per year then that is going to look very obvious.

Yes RedhelenB and catsareevil I agree. If I thought I could get my mum into a nicer carehome and use her money to fund this then I would prefer that - as it is, she doesn't want to move and the carehomes we've looked at won't consider you unless you have funds to cover a good few years. My Mum's funds wouldn't stretch to even 2 years at the Bupa one we were looking at.

To be fair my sister and other siblings are just struggling to face the fact that this is how the system works. I knew this already and never entertained an idea of any "inheritance". They are not money grabbers or anything and visit my Mum all the time because they are local whereas I am hundreds of miles away. Mum wants them to have the money - none of them can bear the fact that once you go into care this money has to go into funding your care. Will have a quiet word with my sister.

The fact sheet linked to by MrAnchovy is pretty clear, so maybe that might help them to understand. If they have got hung up on an idea of 'their inheritance' it might be hard for them to get their heads around.