Nearing end of life finances

Doesn’t feel particularly good writing about this, but been at my mum’s this weekend and started to look at Bungalows to move her into, which prompted conversations about her finances and what to do with her money. We’re not talking insanely huge amounts – some modest savings and whatever equity’s left from the house move.

In the event that she needs care, I believe wealth testing will mean that “they” will draw on her finances right down the last £22k (enough to pay for funeral, life admin etc I presume). While my socialist values do not oppose that, if some can be moved out of the way in advance, is it still the case that monetary gifts can or will be taxed if the gifter dies within 7 years?

Any experience on here of protecting inheritance? Which again feels very privileged / entitled to be asking, but there is a “need” to keep some back within the family if possible.

You’ve basically covered it. you’d need to gift anything now, assuming she lives another 7 years, otherwise it will be taken as an offset against care. We had to put a charge on the house with the LA for MIL’s nursing care. The care costs basically took half the house’s value by the time MIL passed away.  What ever you do, it needs to be above board as HMRC and Local Authorities are very aware of ‘depravation of assets’.

It’s the way it is. May be worth pre-paying for a funeral plan if you need to keep some savings ‘down’ – we did that for MIL – she was dead against, but then realised why it needed doing to keep her savings under the £22k-£23k.

There is a yearly maximum for gifts – £3,000 in total . Any more than this is fine, but as you say, if the gifter dies within seven years, they may well be clawed back to be subject to IHT.

First thing to think about if you haven’t done so already is to set up power of attorneys, both financial and medical. You don’t have to take over immediately, but if it is in place then if something happens that mentally incapacitates your mum, you can step in seamlessly and help her.

As far as protecting equity from care costs, that’s one for a financial adviser, but my feeling is that if she downsizes and has some cash, the gifting rules come into play again.

Presumably you’re aware that one person can own half a million quid’s worth of assets without IHT coming due?

Gifts – as above. Probably not worth messing about with property.

If it’s IHT that’s main concern, it could be utilised in an AIM portfolio – added risk, but after 2 years (* currently) then it passes out of estate. Also, if there’s an IHT concern, what we set up with mum was a small annuity that paid for a policy, paid out on death to settle IHT and expenses. You can also hand over cash in excess of your normal expenses on a semi-regular basis if you are running an income/expenditure surplus. basically invest in high yield assets then give income away.

And plus ++ on the POA – welfare and lasting.

Avoiding IHT and deprivation of assets to avoid care home costs are entirely unrelated matters, dealt with by different people according to different rules. You need to consider both of them. however, unless the estate is large, you won’t need to consider IHT as you’ll be under the threshold (500k per person, and the 2nd spouse can carry over the first one’s allowance, meaning 1 million for the 2nd death passing assets to children).

Most importantly, get a PoA sorted while you can.

POA is in place – she insisted on that some years back.

@kcal – any details of that annuity?

Thanks all.

Don’t worry about trying to swerve IHT. The Royal Family don’t.

Is there a husband?
My stepdad has everything paid into his account. Hence my mum is very poor and is totally funded while he is totally minted.
He even gets 2 lots of winter heating allowance somehow.
Not right but there you go.
Edit , one thing you can do is get a LPA and a bank card for her account.
Fill your car up every now and then , buy meals out , go “shopping for her”.
You can be gifted for anniversaries , birthdays etc.

To cover iht via life insurance you need a whole of life policy written in trust.  A normal life policy will pay out but is included in the estate on death, the former is not.  Be prepared for some eye watering premiums, you are effectively insuring a certainty in the next few years.

Fairly sure IHT won’t be a thing on those numbers!

OP I think, as the captain suggest, that you’re mixing up IHT and DoA.

It’s DoA I’m talking about, which I didn’t know about as a term so perhaps things got confused.

Yes. Basically if your mother gives you anything significant, it might get clawed back if the local authority believes that she did it to avoid care costs. There is no specific time limit or minimum gift to be considered, but in practice they won’t go after trivial things. If she downsizes and gives away the excess or otherwise gives away ownership of her house, they probably will.

It’s terribly unfair that some people lose a large chunk of their inheritance due to care costs, but it would also be terribly unfair to tax people who don’t have any inheritances heading their way in order to protect the inheritances of the rich. No simple solution unfortunately.

As above. In Scotland anyway I am told by a lawyer I know working did a top firm in this area it is virtually impossible to get a trust to prevent care home fees

https://www.bbc.co.uk/news/uk-scotland-64212430

@thecaptain has it right on DoA in England.

There’s no time limit, they can go back as far as they want. In practice, my mother gifted multi x £10k to my Sister and I 6 months before she needed care and they accepted the events were unrelated (not DoA). Her care needs were also sudden and unexpected as she’d had a fall.

Anything over £14250 in assets and she’ll pay a proportion of her LA care costs. More than £23250, she’ll pay the lot. Don’t forget to apply for Attendance Allowance as well though the LA claw most of it back, they do leave a bit for the applicant.

The process is horrendous and you’re mainly dealing with petty, faceless bureaucrats. I stumbled on a solitary humanoid in my Mother’s LA who helped rather than hindered.

Oh and on PoA. We had both Health & Welfare and Property & Finance. The LA etc insisted my Mother had capacity when it suited them (to get her out of LA 24×7 care) and tried to deny her wishes when it suited (to get her into 24×7 care when care at home costs were mounting). They also said, as she was so clear in her wishes to stay at home, even if she then lost capacity, her original wishes would be considered persistent which undermines the whole point of the PoA. She died at home in dreadful pain 2 weeks ago as a result.

I know this all sounds contradictory (because it is), but the LA play the game to suit themselves and above all, minimise their costs. Don’t trust them at all.