Giving gifts of money

[Munchies]

Dad has recently sold his house and moved into residential care when he talked with the solicitor to sort this he asked about giving us a gift of money before it all gets used up on fees. The solicitor told him he can make gifts of upto £3000 to all 3 of us without any worries. Is this still permissible given that one of us has LPA for finance and one for health. He is very vocal about giving us this money but don't want it to seem like we are doing anything underhand.

And does he have to transfer the money himself or is my brother who deals with his finances able to do it although thinking about it if it is done online who would know

 

[Murper1]

Hello. This may not help, but it occurs to me that £3000 coincides with the total annual amount that can be gifted to someone before inheritance tax would be payable if the donor died within 7 years. Do you think this is what the solicitor was thinking of?

 

[Slugsta]

I think the solicitor was probably referring to the rules around gifts and inheritance tax.

Does giving away large sums of money fit with the Attorney's duty to use the funds in the best interests of the donor? Small gifts of money are certainly allowed, the sum quoted is usually £25.

The other issue is whether the LA would consider this 'deprivation of assets' when they assess the financial situation. I think they are more likely to do this if giving away this sum puts the donor underneath, or near to, the limit at which the LA have to pay the full amount for care (I think this is just over £23,000).

 

[Kevinl]

he asked about giving us a gift of money before it all gets used up on fees.

I'd be careful, giving away money specifically if it's done to avoid fees, it could be seen as a breach of the 2014 care act, section 70, paragraph 1, section b

"the transfer was undertaken with the intention of avoiding charges for having the adult’s needs met"

If the LA did become involved they could regard the gifts in breach of the rules and he could be assessed as if he still had the money.
K

http://www.legislation.gov.uk/ukpga/2014/23/section/70/enacted

 

[Munchies]

Dad is still of that era that he scrimped and saved to have something to leave us and I agree it's more important that he is safe and well cared for so am not majorly bothered (although I wouldn't say no) however now dad knows the money from sale of house is in his bank account he is adamant about giving us some.

He won't be below the threshold for needing LA funding even if he gives us some for at least another year and as he is on max amount of oxygen 20hrs a day he will definitely need care

 

[Shedrech]

hi Munchies
might your dad write each of you a cheque, so he feels he has given something to you all, then you keep hold of the cheques and don't cash them (tear them up?) - if he asks, you just say you've not had a chance to get to the bank .... - if he doesn't ask, and doesn't see the bank statement, he'll be none the wiser

 

[lemonjuice]

hi Munchies
might your dad write each of you a cheque, so he feels he has given something to you all, then you keep hold of the cheques and don't cash them (tear them up?) - if he asks, you just say you've not had a chance to get to the bank .... - if he doesn't ask, and doesn't see the bank statement, he'll be none the wiser

I was going to suggest something similar. Keep your father happy and thank him for his gift etc. But then just leave the money in the bank, so there are no problems further down the line.

 

[Pete R]

I'd be careful, giving away money specifically if it's done to avoid fees, it could be seen as a breach of the 2014 care act, section 70, paragraph 1, section b

"the transfer was undertaken with the intention of avoiding charges for having the adult’s needs met"

If the LA did become involved they could regard the gifts in breach of the rules and he could be assessed as if he still had the money.
K

http://www.legislation.gov.uk/ukpga/2014/23/section/70/enacted

The last paragraph is correct but you cannot be in "breach" of Sec 70 of the Act.

Sec 70 relates to the LA right to "Enforcement of Debt" and what amounts they can recover.

Annexe E of the guidance covers Deprivation of Assets.
https://www.gov.uk/government/publi...-guidance/care-and-support-statutory-guidance

 

[Chemmy]

Dad is still of that era that he scrimped and saved to have something to leave us and I agree it's more important that he is safe and well cared for so am not majorly bothered (although I wouldn't say no) however now dad knows the money from sale of house is in his bank account he is adamant about giving us some.

He won't be below the threshold for needing LA funding even if he gives us some for at least another year and as he is on max amount of oxygen 20hrs a day he will definitely need care

If he had enough to be able to self fund for five years plus say, I wouldn't be so concerned. But if you're saying the LA might be involved after a year or so, that's a very different story. Sorry to be so blunt, but that may well mean that local council tax payers end up forking out so you have an early inheritance.

 

[Pete R]

Dad has recently sold his house and moved into residential care when he talked with the solicitor to sort this he asked about giving us a gift of money before it all gets used up on fees. The solicitor told him he can make gifts of upto £3000 to all 3 of us without any worries. Is this still permissible given that one of us has LPA for finance and one for health. He is very vocal about giving us this money but don't want it to seem like we are doing anything underhand.

And does he have to transfer the money himself or is my brother who deals with his finances able to do it although thinking about it if it is done online who would know

In the guidance notes to the CA2014 Sec 8.27 states....

"People with care and support needs are free to spend their income and assets as they see fit, including making gifts to friends and family. This is important for promoting their wellbeing and enabling them to live fulfilling and independent lives. However, it is also important that people pay their fair contribution towards their care and support costs."

If is a genuine gift from your Father and it would make him happy now whilst he can still have those emotions then why not.

If it is to avoid care fees in the future then maybe not.

Bear in mind that when the LA do come calling and are not happy with the gift, you could always pay it back or also remember your Father will always be left with £14250 of his money to use as and when he sees fit and if he wants to give that away then so be it and the LA can do nothing.

 

[Chemmy]

My MIL's house was sold and she is self-funding her own residential care. My OH has financial LPA and gives gifts of £50 each on her behalf to each of his sisters for Christmas and their birthdays. As attorney, he does not feel morally justified in giving similar gifts to himself, even though his sisters suggested that he did.

I feel that level of gifts is acceptable; £3000 each is a completely different ball game and as the OPs father is already in residential care, I can't see how it could be considered as anything other than deliberate deprivation of assets.

By the way, if anyone asked her, I'm sure my MIL would be quite happy for all her assets to be given away now to the family. But that's not really the point, is it?

 

[lemonjuice]

If is a genuine gift from your Father and it would make him happy now whilst he can still have those emotions then why not.

If it is to avoid care fees in the future then maybe not.

Bear in mind that when the LA do come calling and are not happy with the gift, you could always pay it back or also remember your Father will always be left with £14250 of his money to use as and when he sees fit and if he wants to give that away then so be it and the LA can do nothing.

Good point. If needing to involve SS fairly soon they may well decide that those gifts are part of that £14250. You might be required to pay it back or not have enough for funeral and other related expenses.

 

[nicoise]

Referring to the first post, the financial limit that can be gifted without incurring IHT in one year is £3000 in total whether it is to one person or divided between several.

It doesn't sound as though IHT is going to be an issue if Munchie's father only has enough funds to pay for residential care fees for one year, as the IHT threshold starts at £325,000 at present.

Giving away cash at this late stage knowing that his funds will drop below the threshold for self-funding in one year and he will need a financial assessment As he approaches that sounds an unwise move - I'm not sure that the solicitor gave good advice, given the information that has been posted.

Munchies, I know this all sounds very unfair given that he worked to save his money, and that because of the system those with dementia have to pay for their care - everyone feels that; but unfortunately it is what it is. The only saving grace is that it can afford some element of choice as to where care can be given, rather than just being told where to live...

 

[Chemmy]

Good point. If needing to involve SS fairly soon they may well decide that those gifts are part of that £14250. You might be required to pay it back or not have enough for funeral and other related expenses.

In that case, surely it would be wise to wait until a financial assessment was carried out and THEN give the money away from the residual £14250. Why the hurry?

 

[nitram]

Moving from the deprivation of assets to IHT.

Each year a total of £3000 worth of gifts is exempt so each of you could be given £1000 each tax year - 6th April to the next 5th April.

You are allowed to use up any unused exemption from the previous year so if there were no gifts last year the amount doubles to £2000 each.

On 6th April it will be a new tax year so another £3000 total would be exempt.

Small gifts out of income for Christmas and birthdays are also exempt.

https://www.gov.uk/inheritance-tax/gifts


Additionally any amount of gifts can be made as 'normal expenditure out of income'

"21
Normal expenditure out of income.

(1)A transfer of value is an exempt transfer if, or to the extent that, it is shown—

(a)that it was made as part of the normal expenditure of the transferor, and

(b)that (taking one year with another) it was made out of his income, and

(c)that, after allowing for all transfers of value forming part of his normal expenditure, the transferor was left with sufficient income to maintain his usual standard of living."

http://www.legislation.gov.uk/ukpga/1984/51/section/21?view=plain

HMRC have an internal manual on how the terms of the Act should be a applied.
In common with all government internal manuals it is available online

https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm14231

 

[Chemmy]

As others have suggested, the solicitor was probably getting confused with inheritance tax and gifts, and the £3000 figure is a red herring in the OP's circumstances.

 

[Slugsta]

Can the Attorney justify the gifts as being in the donor's best interests? AS I said upthread, sums of around £25 are usually quoted when discussing gifts to others for Christmas, birthdays etc.

Does your father have a recorded history of giving the larger amounts to family? This is something that the LA and Court of Protection would probably look at when deciding whether the gifts were reasonable.

 

[Tubbsy]

Can the Attorney justify the gifts as being in the donor's best interests? AS I said upthread, sums of around £25 are usually quoted when discussing gifts to others for Christmas, birthdays etc.

Does your father have a recorded history of giving the larger amounts to family? This is something that the LA and Court of Protection would probably look at when deciding whether the gifts were reasonable.

There is a 'de minimis' rule meaning up to £3000 and gifts of up to £250 for close family members can be given in a tax year as long as the person has a life expectancy of more than 5 years, giving the money away doesn't take them below the iht threshold and as long as they used to give gifts of a similar amount.

 

[jugglingmum]

There is a 'de minimis' rule meaning up to £3000 and gifts of up to £250 for close family members can be given in a tax year as long as the person has a life expectancy of more than 5 years, giving the money away doesn't take them below the iht threshold and as long as they used to give gifts of a similar amount.

These are an approximation to the IHT rules, but as menitoned above the deprivation of asset rules really are the relevant ones.

The exempt gift rules are up to £3,000 to one person, and gifts to as many people as wanted in a tax year, there is no requirement for any of the people to be close family and there is no life expectancy requirement.

However regular gifts out of income can be made of any size.

The reference to IHT threshold is not relevant.

Larger gifts can be made and become exempt if the person survives for 7 years.

As is regularly stated on here, the IHT rules have no relevance for someone who can anticipate the need for monies being required for their care.

 

[Kevinl]

These are an approximation to the IHT rules, but as menitoned above the deprivation of asset rules really are the relevant ones.

Agreed, as the man concerned is already in care then it's no longer the case you could have argued that there was 'no expectation' of him needing care when the gift was made and there's nothing in the post to indicate there is a pattern of giving.
K