Gifting as an Attorney

[SarahL]

Hello all, I haven't been on for a while and hope you are ok.
I am POA for my Mum.
After Mum went into care my two siblings (who did nothing for Mum during her ill-health) wrote to me telling me to ensure I was acting in her best interests and latterly threatened me with the Office of the Public Guardian if I didn't share information about Mum's finances to them. I took legal advice on this after feeling very anxious about the situation.
The reason I am writing is that a friend has suggested I gift monies to my siblings and myself which I know I can do under my role as attorney. The friend's view is that the money will be taxed in the long run which I know makes sense. I would never take money for myself and have therefore never done any gifting - so the friend is saying gift to my siblings and myself as that way the tax can be managed plus I will be doing things equally. However I just don't know if I feel able to gift money to my siblings after the way they treated me on principle. Can anyone give me their thoughts on this please?
Many thanks

 

[Amethyst59]

My first thoughts are that 'gifting' saves tax only if the donor lives for seven years after the 'gift'. Sorry, I'm not implying that your mum might not! The other thing is that a tax benefit only applies if your mum's capital is above the allowance (not sure of exact figure but it runs into £100k's, and can be nearly double as your mum would get to 'inherit' unused inheritance allowance from a deceased spouse).
Then you need to consider whether your mum can afford to give capital away...or will it be needed for her care? I'm pretty sure that you cannot try to 'get under the threshold' to receive paid for care, by giving your capital to family members.
On top of that, and probably least importantly you need to consider whether or not siblings'deserve' capital. If it would be a tax advantage, to avoid inheritance tax, and if there is sufficient capital to disperse and to pay for care ....then it would presumably be inherited by siblings anyway, and it would be worth avoiding inheritance tax.

 

[canary]

The reason I am writing is that a friend has suggested I gift monies to my siblings and myself which I know I can do under my role as attorney.

No you cant. You cant use your POA to benefit family and friends. Period.
It will also be considered as Deprivation of Assets by the Local Authority, so when mums money runs out the LA will want it back and she will still be billed as if she had this money.
Dont even think about it.

 

[marionq]

No you cant. You cant use your POA to benefit family and friends. Period.
It will also be considered as Deprivation of Assets by the Local Authority, so when mums money runs out the LA will want it back and she will still be billed as if she had this money.
Dont even think about it.

If you feel obliged to respond to your siblings simply tell them that you will be happy to provide the OPG with financial details if that becomes necessary. Do not use your mothers money for pointless gifts. They will never be satisfied. Her money is for her care.

 

[jugglingmum]

I am assuming by the comment of saving tax, that your mum's assets are above the Inheritance Tax Nil rate band of £325k,(and as Amethyst mentions this can include any unused Nil rate band from a deceased spouse, being the rate that existed at the time of the spouse's death). There is also the main residence allowance if your mother's house was sold after July 15 and the estate passes to her children.

As Amethyst also states, beyond the £3k annual gift limit, your mum would need to survive 7 years to be completely IHT free, although taper relief comes into play if she survives 3 years.

I am also assuming that if she has assets above the IHT threshold, she is self funding and you anticipate she will remain so until her death, so no deprivation of asset issues will come into it, if deprivation of assets comes into play you won't be worrying about IHT.

My understanding is that you can gift what your mother would have normally gifted for birthdays and Christmas presents, but you can't gift anymore. My mother always gave the 4 of us (2 children and partners £250 each for Christmas and birthdays - I have continued this - not something to be done if deprivation of assets is likely to kick in), so in my mothers case (we think she is unlikely to pay IHT but may be close to the limit) when she sold her house we would have loved to transfer a sum to myself and my brother - she is still early stages and highly likely to survive 3 years, however we didn't consider as attorneys we had the ability to make discretionary decisions of this nature, we have young children, and so money now would be more helpful than money later. So keeping up the annual smallish gifts is the best we can do.

As far as the effect on you and siblings - it depends on if there is a will, if there isn't you will all inherit equally so they will get their share anyway.

The only thing you can do is make sure you have claimed for all out of pocket expenses on anything you have spent on your mum, including travel to take her things she needs (you aren't allowed to claim travel for social visits)

 

[RedLou]

I am assuming by the comment of saving tax, that your mum's assets are above the Inheritance Tax Nil rate band of £325k,(and as Amethyst mentions this can include any unused Nil rate band from a deceased spouse, being the rate that existed at the time of the spouse's death). There is also the main residence allowance if your mother's house was sold after July 15 and the estate passes to her children.

As Amethyst also states, beyond the £3k annual gift limit, your mum would need to survive 7 years to be completely IHT free, although taper relief comes into play if she survives 3 years.

I am also assuming that if she has assets above the IHT threshold, she is self funding and you anticipate she will remain so until her death, so no deprivation of asset issues will come into it, if deprivation of assets comes into play you won't be worrying about IHT.

My understanding is that you can gift what your mother would have normally gifted for birthdays and Christmas presents, but you can't gift anymore. My mother always gave the 4 of us (2 children and partners £250 each for Christmas and birthdays - I have continued this - not something to be done if deprivation of assets is likely to kick in), so in my mothers case (we think she is unlikely to pay IHT but may be close to the limit) when she sold her house we would have loved to transfer a sum to myself and my brother - she is still early stages and highly likely to survive 3 years, however we didn't consider as attorneys we had the ability to make discretionary decisions of this nature, we have young children, and so money now would be more helpful than money later. So keeping up the annual smallish gifts is the best we can do.

As far as the effect on you and siblings - it depends on if there is a will, if there isn't you will all inherit equally so they will get their share anyway.

The only thing you can do is make sure you have claimed for all out of pocket expenses on anything you have spent on your mum, including travel to take her things she needs (you aren't allowed to claim travel for social visits)

I would echo JM's understanding. I was able to make a gift to my nieces from my father's assets while I was managing his affairs. I checked with our lawyer as I increased the amount from his usual yearly sum to take into account that he had forgotten their birthdays and Christmas the previous year while remembering to give sums to the children of friends. (!) I was told that this was justifiable and the courts would accept this. (He was not resident in this country and the courts took the place of the OoPG.)

 

[canary]

It depends very much on how big the gift is and whether this is usual. If she usually gives £25 on birthdays and suddenly you (as POA) gift £1,000 the OPG are going to take a dim view of it.

If the gifting is to avoid Inheritance Tax, remember that she will have to live for 7 years afterwards, otherwise it wont count. Mums assets are in probate at the moment and one of the questions asked is whether she has gifted anyone with money during the past 7 years.

It also depends on how quickly the money is going to run out. The average stay in a Care Home is 2 years, but some people have lived much longer than that. If the gifting is to avoid Care Home fees, this will count as Deprivation of Assets. Even if its not in order to avoid the fees, if her money runs out then the Local Authority will treat it as such.

With all of this, plus the fact that you dont think that your siblings deserve it, I wouldnt even go there. Lots of people think that there are ways to avoid the system, but actually it can come back to bite you.

 

[Shedrech]

hi SarahL
seems to me that the sisters have answered this question
my two siblings (who did nothing for Mum during her ill-health) wrote to me telling me to ensure I was acting in her best interests
any gifting is not in your mum's financial interests = simple

I think the friend is naively doing what many do, thinking that you 'deserve' some financial help and that as you are an Attorney you can do what you want with your mum's money; forgetting that the money is exactly that, your mum's and that an Attorney cannot play fast and loose with someone else's money

you're asking this here because you do not feel comfortable with your friend's suggestion; trust your instincts

best wishes

 

[jugglingmum]

If the gifting is to avoid Inheritance Tax, remember that she will have to live for 7 years afterwards, otherwise it wont count. Mums assets are in probate at the moment and one of the questions asked is whether she has gifted anyone with money during the past 7 years.

Not quite true, if the donor survives 3 years then the gift falls into the taper period so IHT reduces by 8% a year. IHT is 40% so if the donor dies between 3 and 4 years after the gift is made, then IHT reduces to 32%, 4 and 5 years after the gift is made 24% etc until 7 years after the gift it is IHT free.

We have looked into this for MIL - age 90 full capacity, still living alone and driving, so whilst 7 years maybe unlikely she may well live over 3 years and so worthwhile.

Ultimately if someone is looking to reduce IHT then they are probably outside deprivation of assets considerations, especially if they have the spouses allowance and the main residence allowance and are still over this.

Gifts are all relevant to a person's assets, but if someone is above IHT limit it is likely think an annual gift of several £100s is reasonable, and commensurate with their circumstances.

 

[malengwa]

Like others I wouldn't go there. I couldn't imagine giving my mum's money away when she is almost certainly going to need it for her care. Yes a typical birthday or Christmas present maybe, although my dad always did that, but not other 'gifts' and certainly not big ones. Mum doesn't have megabucks maybe just enough for 2 years of care so every penny I spend of hers I record along with the reason.

 

[canary]

Jugglingmum, I agree that if you are genuinely in the realm of inheritance tax (even after care home fees), the Deprivation of Assets is not going to be an issue. I didnt know about the taper period and you have obviously thought through your MILs finances very thoroughly. However, many people come on here asking about Inheritance Tax who are nowhere near the threshold and I get the feeling that what they are actually asking is how they can squirrel away some of the money so that it doesnt all go on care home fees. They can see all the money disappearing and often think that gifting money under the pretext of reducing Inheritance Tax is the way to go. Just in case this is the situation with the OP I pointed out about Deprivation of Assets.

 

[SarahL]

Dear everyone, thank you so much for your advice, thoughts and input. I have also taken advice from Mum's accountants for her tax affairs regarding gifting and can apparently gift £3,000 per year tax free. I still haven't decided what to do as can't bring myself to gift to siblings given that they threatened me over her money which made me ill with worry but mainly because they did nothing for Mum ever. I have thought about gifting some money to Alzheimer's research as a way to reduce monies that will eventually go in IHT, as Mum is well over the threshold - but am still thinking about what to do for the best and what's in Mum's best interests and what she would prefer if she still had capacity. It's so sad because Mum never had much as a child and then didn't want to spend her money as an older adult and so never got to properly enjoy her money . Does anyone know if it is possible to take out the £3,000 annual maximum allowed and put it into an account to avoid IHT and then decide at a later date who to give it to? Just a thought.

 

[Shedrech]

hi SarahL
did your mum make any such gifts when she was managing her own finances?
from what you have written, she didn't
so all you are required to do as her Attorney is to continue to make sure her expenses are paid and her money is consolidated
she would not want you worrying, at least I know my dad wouldn't want me stressing - so take the path of least effort and make no gifts of any kind
best wishes

 

[Beate]

The advice about £3,000 a year is tax advice - it is NOT the correct advice when it comes to what's considered deprivation of assets. Sadly most accountants and tax advisors are not aware of this particular pitfall. If there is a likelihood of her requiring care paid for by the council, then money cannot just be gifted away according to tax rules - it has to be gifted away according to previous behaviour, and it has to be reasonable - like £50 for birthdays or Christmas. Sure, if she's a millionaire and most likely never to need council help with paying care home fees, then you can be a bit more relaxed. But you still have to act in her best interests and if you feel that gifting to your siblings isn't, then don't do it. No one can force you.

 

[SarahL]

Thank you both. You are right, she never gifted to my siblings at all so this would be completely out of the norm. She did gift me money as I was close to her and she wanted to thank me for my help and support over all the years (bless her) but I'm not going to take any money for myself to avoid IHT now. I don't think there'll ever be any recall for care funding however I didn't realise about the deprivation of assets point, thank you for letting me know this. My sisters were telling me to gift money as soon as she went into care and then questioning me being POA, asking about the will and all her monies which upset me greatly as Mum is very much alive. If my Mum had changed her will before she lost capacity I doubt they'd even be bothering with their occasional telephone calls and annual visits...

 

[nicoise]

If you wish to spend a bit of Mum’s money, then do it on things for her - a weekly hairdresser visit, manicures, pedicures, a nice meal brought into the home that the two of could have together as a bit of an occasion perhaps?

As attorney, you are supposed to be acting in her best interests. Giving away money to reduce her IHT exposure certainly can be seen on the one hand as being in her best financial-planning interest; but she won’t ever benefit from that, only the beneficiaries do! So you 3 beneficiaries will be the worse off by 40% of £3,000? Any inheritance is a bonus... but knowing you did right by your mum in her times of need will be a lifetime bonus your siblings won’t have.

Don’t be bullied, especially by those who don’t know the rules about being an attorney - it isn’t carte blanche to dip into someone else’s funds and distribute them for one’s own benefit. Listen to your instincts - if it makes you feel uncomfortable, then it probably isn’t right.

 

[SarahL]

If you wish to spend a bit of Mum’s money, then do it on things for her - a weekly hairdresser visit, manicures, pedicures, a nice meal brought into the home that the two of could have together as a bit of an occasion perhaps?

As attorney, you are supposed to be acting in her best interests. Giving away money to reduce her IHT exposure certainly can be seen on the one hand as being in her best financial-planning interest; but she won’t ever benefit from that, only the beneficiaries do! So you 3 beneficiaries will be the worse off by 40% of £3,000? Any inheritance is a bonus... but knowing you did right by your mum in her times of need will be a lifetime bonus your siblings won’t have.

Don’t be bullied, especially by those who don’t know the rules about being an attorney - it isn’t carte blanche to dip into someone else’s funds and distribute them for one’s own benefit. Listen to your instincts - if it makes you feel uncomfortable, then it probably isn’t right.

Thank you Nicoise that really does put things into perspective. My gut feeling is not to and for the sake of £3000 or £6000 I agree totally. As you say I have always done right by Mum and I also have good memories and ongoing memories to make. Sometimes I put face cream on Mum and rub cream into her hands and I know she really enjoys this. I haven't taken her out for a while so think I might do this again and I may pay for a carer to come too in case I need an extra hand. This way her money will be being spent on her quality of life. I even thought I'd like to take her out of the care home on a dementia friendly holiday but I think it may cause too much anxiety so will just do little things to achieve happy moments. All the best.

 

[Duggies-girl]

SarahL I understand where you are coming from. My dad has always been generous and a while ago asked me to write three cheques out, one for each of the grandchildren. He has always done this every year. So the three of them got £500 each. I wrote them out and he signed them. One for my boy and the other two for my invisible brothers two children. All in their twenties and they all appreciate it as it is a nice sum for them.

Then he told me to write myself out a cheque but I said he will have to do the same for the invisible brother. Dad said he's not giving him anything because he does nothing for him. (Not forgotten that has he) so I said no and I could blooming well do with a bit of financial help as I only work a few hours a week as I spend most of my time looking after dad whereas brother does nothing.

Point is I feel better saying no as I know that I have not taken advantage of him and never would.

I do let him put some petrol in the car and treat me to lunch every now and then so that may be of help to you.

Also he is well off enough that he would be self funding if it comes to a care home and I don't think it would be seen as tax avoidance.