question re gifts continuing once POA is registered

[nitram]

"For example you could give away £5000 a month for two years and it would be a regular sum. So, you could give away £120,000 this way?"

The personal representative would have to apply to HMRC for this exemption.

Proof of eligibility would be required such as details of all income and expenditure showing that the payments were affordable out of income. If it was only for two years HMRC could ask for such details in the preceding years and if applicable succeeding years.

Income does not include dipping into capital.

 

[Nick99]

If someone had a very large private pension i.e. a hedge fund manager, then a large amount can be given away each month. it would be easy to provide bank statements to verify this and the fact that there is plenty left each month. Are there any rules about the length of time the regular gift has to be given, I would have thought that 24 monthly gifts would have been sufficient to prove the regularity?
Its only hypothetical but at what point does a regular gift out of income need the approval of the tax people - if £60 a month OK, what about £600 or £6000?

 

[nitram]

To claim the exemption details should be sent to HMRC for any amount.

The personal representative has to demonstrate that the gift was out of income and that the donor's standard of living was not affected. The best way to do this is to present detailed accounts of income and expenditure, if these cover the time before the gifts they can show that there was income available, for instance the donor could have been investing surplus income each year.

 

[Nick99]

Goes back to the record keeping. I'm going to check that I am keeping everything.

 

[Norfolkgirl]

As I understand it, the IHT rule means if one owns assets of £325,000 or more, you are allowed to give up to £3000 per year as gifts or £250 to each person per year as gifts and this is known as Inheritance Tax planning. There would be no benefit to gifting if assets have never reached £325,000.

The issue is when self-funders, who have never reached the assets of £325,000 (IHT threshold), never previously gave reasonable amounts proportionate to the size of their estate regularly over a period of time BEFORE the self-funder was intending to need permanent care, then this could be deemed as Deprivation of Assets by the LA.

If a time occurs whereby the self-funder's funds diminish and needs the LA to take over funding in order for the self-funder to remain in care, then this is when they look back at previous spending to see if gifting was made. If it appears the gifting has only recently occurred at a time when it was likely the self-funder was to need these funds for care, then this is when the gifting will come under scrutiny and the LA would then take the view that the self-funder still has those gifted amounts and therefore not need funding help from LA at that point in time.

 

[Saffie]

this could be deemed as Deprivation of Assets by the LA.

It also contravenes the LPA which was what the OP was concerned about. Needlessly in Aquamanda's case but the (hypothetic) scenario suggested by Nick99 would be in considerable breach of the LPA.

 

[Nick99]

In the example I mentioned, of a person with a large private pension, there would be no need for the LA to check as there would be plenty of money to self fund a care home. I did not follow how it would be a considerable breach of the LPA?