Personal taxation

[SVENUK]

My mother in law is going to have to move to a care home in the future. As she has a bit of money and investments she is over the threshold.
Any idea how much she can give away in little bits to the family to reduce this amount before anybody pays tax on it.
Do not want my blair/brown getting their greedy mits on it do we
Been on the net but am a bit confused as to what we can get away with ;)
David

[ButtonMonkey]

My mother in law is going to have to move to a care home in the future. As she has a bit of money and investments she is over the threshold.
Any idea how much she can give away in little bits to the family to reduce this amount before anybody pays tax on it.
Do not want my blair/brown getting their greedy mits on it do we
Been on the net but am a bit confused as to what we can get away with ;)
David

This is always a difficult one as time scales can always play a major part of any asset protection.

An offshore trust fund may well be one option have a look here (http://www.ocra.com/services/offshore_trusts01.asp), I've only chosen Ocra as they do have good information but there are many companies around. Just make sure they are registered with the local Financial Comission.

The Isel of Man isn't alll it used to be for privacy but Gibralter is worth looking at as is Jersey

[nobber]

i was under the impression that inheritance is tax free providing it is passed on more than 7 years before the person acually passes away , i could be wrong though.

[Alice]

Amounts of cash should not be questioned too much as to where it were going and what for.
Some yrs ago a relative died and he left cheques of £3,000 per hanger on so this may have been the lower limit.
I heard that death duty has to be paid even if the amounts were given prior to death. Possibly the time limit there was 7yrs. My Father is still hanging on and he loaned us some of his redundancy money to buy our house at least 14yrs ago. Not having anything in writing to say we'd paid him back was a bit of a worry as I don't know how it would have been treated with regards to death duties.

[SVENUK]

Going through the info on the web i found that it's illegal to give money away to relatives to in order to qualify for financial help from your local council.
This is called 'deprivation of assets'. If the local authority believes that you have deliberately given away assets so as to reduce or avoid fees for accommodation they may try to claim the fees back.
The problem is that this threshold is 24k and she does not own her own home.She's got a little more then this but not much more.
AT 450/500 quid a week her money would go in 12 months at which point we would then be in the position of finding a cheaper home if the social services will not pay up.

[nobber]

perhaps she should pass it on to a third party (none relative) who can then pass it on to you?
or is that laundering?

[GreyBack]

Going through the info on the web i found that it's illegal to give money away to relatives to in order to qualify for financial help from your local council.
This is called 'deprivation of assets'. If the local authority believes that you have deliberately given away assets so as to reduce or avoid fees for accommodation they may try to claim the fees back.


Your assessment is correct. The local authority will seek to get the money back - ruthlessly if necessary.

[ButtonMonkey]

perhaps she should pass it on to a third party (none relative) who can then pass it on to you?
or is that laundering?

Nope that's a trust fund

[GreyBack]

i was under the impression that inheritance is tax free providing it is passed on more than 7 years before the person acually passes away , i could be wrong though.

Half-true, but not completely so.

I have recently heard of a siituation where someone gave away some assets to avoid paying inheritance tax. Their accountant said that provided they lived 7 years they would avoid paying tax.

The accountant forgot to mention capital gains tax applicable on the gift.

The bill?

Probably not much change out of £1,000,000.

:eek:

You also need to remeber that giving stuff away is OK provided you don't need it. Generally speaking, we all need something to get by on, so giving it all away isn't an option.

The original question here in any case is not about avoiding inheritance tax, it's about whether you can give away assets so as to benefit from local authority funding.

An the asnwer is NO.

[GreyBack]

perhaps she should pass it on to a third party (none relative) who can then pass it on to you?


That's an "arrangement" and will be treated as if the money was given directly to you.

Could arguabley come under money laundering as you seek to obtain something by deception.

[adrianandkate]

David, your last post after looking at the web looks pretty accurate to me. We looked into this a couple of years ago, and at the time, we were told that when my mother-in-law's money would have run out - having used absolutely all her assets, social services would then have funded the care. But we weren't happy with the life for her in a home anyway,:( so we planned to bring her to live with us. (And yes, we did talk it through - lots). It didn't happen but it would still have been our preferred choice. Make sure you - and your mother-in-law - have absolutely all the information available before you go down this road. PM me if you want. Adrian.

[GreyBack]

Amounts of cash should not be questioned too much as to where it were going and what for.

I have seen the local authority ask for copy bank statements and trace every payment.

[GreyBack]

My Father is still hanging on and he loaned us some of his redundancy money to buy our house at least 14yrs ago. Not having anything in writing to say we'd paid him back was a bit of a worry as I don't know how it would have been treated with regards to death duties.

If it's a loan, it still forms part of his "estate" and will be include din any total on which IHT is payable.

If during teh last 14 years, but more than 7 years ago, he converted the loan into an outright gift, it might not be included.

If he gave it to you,m you wouldn't have to repay it.

If he hasn't given it to you , you will have to repay it.

If he give it to you now, he will need to live another seven years.

[nobber]

what if , say , she/he baught soimething from a third party?

[GreyBack]

There's nothing to stop her buying something.

She then has the something, not the cash, and the third party have the cash, not the something.

Perhaps a new Land Rover?

[GreyBack]

But it would be HER Land Rover

[SVENUK]

David, your last post after looking at the web looks pretty accurate to me. But we weren't happy with the life for her in a home anyway,:( so we planned to bring her to live with us. (And yes, we did talk it through - lots). It didn't happen but it would still have been our preferred choice. Make sure you - and your mother-in-law - have absolutely all the information available before you go down this road. PM me if you want. Adrian.

We have talked it out and yes we would prefer her to live with us but that throws up all sorts of problems.

Once she's with you the s/services will say you seem to be doing all right so you do not need us.
You then have to arrange respite care for her if you go on holiday which will need paying for by you or her, that's if she has any money left.
arrange day care just to go out for the day.
The list goes on and i've worked in a care home and done day care for people .
It wears relatives down

As for spending her money you have to prove you did not spend it willy nilly on anything else that was not neccessary.
Unfortunatly they have you by the short and curlies i'm afraid.
Will start buying things like electric adjustable bed raising armchair /wheelchair to get her around and so on.
Pre-paid funarel might be an idea well.
David

[adrianandkate]

do you have power of attorney?

[Alice]

Half-true, but not completely so.

I have recently heard of a siituation where someone gave away some assets to avoid paying inheritance tax. Their accountant said that provided they lived 7 years they would avoid paying tax.

The accountant forgot to mention capital gains tax applicable on the gift.

The bill?

Probably not much change out of £1,000,000.

:eek:

You also need to remeber that giving stuff away is OK provided you don't need it. Generally speaking, we all need something to get by on, so giving it all away isn't an option.

The original question here in any case is not about avoiding inheritance tax, it's about whether you can give away assets so as to benefit from local authority funding.

An the asnwer is NO.In this case is it not possible to take action against the accountant for giving poor quality advice & reclaim some of the loss.
They are obliged by some code surely to not decieve their client.
I know of someone who lost a case against an employer for injuries sustained at work and the company then went bust. He brought a claim against the solicitor for not working in his best interests and many yrs after the injury he managed to claim damages against whatever the soicitors governing body is called.

[Alice]

Can it not be argued that your mother has a natural generous nature, that it's christmas and she would like to share the best remaining months with her family and enjoy seeing them happy by plying them with gifts.

Alternatively why don't the family do some small jobs for her.. sorting out her belongings, cleaning the house and garden. If she chooses to pay family who she trusts over and above strangers then that cannot be deemed as deception by the authorities.
Home helps can be paid anything over £5 per hr.. add some sleepin & wakeful nights and any of her assets would disappear rapidly. This is not disception but a fact of life as any social worker will realise.. private health care is expensive.
If your Mother is loosing some of her faculties then she will not trust cheques or strangers.. she will prefer to conduct her business by using cash where she can feel that she is not indebted to her relatives for showing her kindness and genuine care. If she forgets who she gave the money to, when and how often.. no-one can blame her as she is elderly and in need of care at a faster rate than the social services can provide a bed.

[Mogwyth]

On the question gifts and tax etc try this goverment website (http://www.direct.gov.uk/MoneyTaxAndBenefits/Taxes/InheritanceTaxEstatesAndTrusts/InheritanceTaxArticles/fs/en?CONTENT_ID=10010612&chk=9Tm0VZ)

[EquilibriumX]

On the question gifts and tax etc try this goverment website (http://www.direct.gov.uk/MoneyTaxAndBenefits/Taxes/InheritanceTaxEstatesAndTrusts/InheritanceTaxArticles/fs/en?CONTENT_ID=10010612&chk=9Tm0VZ)


As I understand it, trust funds were the loophole. But this was tighten-up a while ago.

EX

[EquilibriumX]

[...] The original question here in any case is not about avoiding inheritance tax, it's about whether you can give away assets so as to benefit from local authority funding.

An the asnwer is NO.


I generally agree, although, I do not no whether it is impossible – my knowledge of the specifics are relative limited. I also agree with the other important point your raise, i.e. “The local authority will seek to get the money back - ruthlessly if necessary.”

Ex

[EquilibriumX]

Moggy, I am not sure why I qouted you above, obviously pressed the wrong button. I was replying to the thread in general.

Ex

[Mogwyth]

As I understand it, trust funds were the loophole. But this was tighten-up a while ago.

EX

Very complex area but broadly speaking there were/are two types of trusts those set up for the benefit of the benificaries and those set up to avoid tax, it was the latter that were clamped down. Don't ask me the difference or to explain how they work, thats a job for a solictor ot accountant or even both.

[Newsreader]

Well seeing as Greyback is an accountant, I think I would trust his words on these matters ... :D

[ButtonMonkey]

Very complex area but broadly speaking there were/are two types of trusts those set up for the benefit of the benificaries and those set up to avoid tax, it was the latter that were clamped down. Don't ask me the difference or to explain how they work, thats a job for a solictor ot accountant or even both.

And it's not an area you want advice form a UK based solicitor or accountant (sorry to both professions) they have enough problems with the UK systems let alone knowing what is best offshore. Most of them have regular meetings with their jurisdictions tax offices to work out the best way around local tax laws, and hey why wouldn't they the IOM charges £750 a year per offshore company in tax and it probably costs them £25 to administer it so it's all pure profit to them

If you want to find out about offshore trusts contact a solicitor in one of the nearby jurisdictions, IOM, Gibralter, Jersey or Gurnsey.

[freelanderPX54]

Once the money gets down to around £12k (I think) then social services pick up the tab for providing home help etc. What you need to do is syphon money off monthly. As has been said earlier, your mum has expensive tastes and yes, she really did need that £7000 plasma telly:)

It is difficult to make the cash withdrawls look legit but with a bit of care it can be done. We are going through this with Kim's Nana. It is galling that someone who has worked hard all their life to amass a nest egg has to use it to prop up Social Services budget. Yet if she didn't work thru' her life, the help from the SS would be there

[Mogwyth]

It is galling that someone who has worked hard all their life to amass a nest egg has to use it to prop up Social Services budget. Yet if she didn't work thru' her life, the help from the SS would be there

Now you are getting onto a minefield, on one hand you have got to bear in mind that the state never used to provide cradle to grave care, people are living longer so more need care in thier twilight years, families are too busy and widespread to care for thier own, if free care for the elderly was available for everyone taxes would rise......... a lot and what do people save for their old age for any way if not to pay for thier care and not be a burden. On the other hand why should you work hard and scrimp and save for your old age if you can pi55 it up or do fa and get the same care. Oh the joys of trying to provide a fair welfare state.

[EquilibriumX]

It is difficult to make the cash withdrawls look legit but with a bit of care it can be done. We are going through this with Kim's Nana. It is galling that someone who has worked hard all their life to amass a nest egg has to use it to prop up Social Services budget. Yet if she didn't work thru' her life, the help from the SS would be there


Hello mate, I not looking for an argument or anything but,

It is unlikely (unless she was a very high earner) that her tax contributions will have been enough to cover, including future costs, health care, general care, housing and pension etc. and the UK has an aging population, the cost of providing for the elderly will increase.

EX

[EquilibriumX]

[...] As has been said earlier, your mum has expensive tastes and yes, she really did need that £7000 plasma telly:)



I thought plasma TVs were the 4x4s of the home. :D :D :D :D :D :D

EX

[Mogwyth]

I thought plasma TVs were the 4x4s of the home. :D :D :D :D :D :D

EX


Oops double post

[Mogwyth]

I thought plasma TVs were the 4x4s of the home. :D :D :D :D :D :D

EX


Yep should get an LCD or cathode Ray, much better for the enviroment:D

[Pogmahog]

Having gone through this with my Father 2 years ago with him moving from sheltered accommodation to care home I know the problems.

The authorities in Northern Ireland slightly more human.

The Plasma Screen TV is a no no. However a new Tv in a care home, which probably will have at least Freeview or digital ariel can be argued, also if only has a 32" at present home, much to big for her bedroom so need smaller!

You can "loose" sorry account for small ammounts in this way.

Big amounts harder, get a joint bank account. before joint bank account she writes you a cheque for £3000, after joint bank account you write cheque from your account for £3010 into her account.

Therfore by law you can you can argue part of that money is YOURS you are topping up her account for her old age.

Difficult to prove otherwise.

Steven

[Alice]

Going through the info on the web i found that it's illegal to give money away to relatives to in order to qualify for financial help from your local council.
This is called 'deprivation of assets'. If the local authority believes that you have deliberately given away assets so as to reduce or avoid fees for accommodation they may try to claim the fees back.
The problem is that this threshold is 24k and she does not own her own home.She's got a little more then this but not much more.
AT 450/500 quid a week her money would go in 12 months at which point we would then be in the position of finding a cheaper home if the social services will not pay up.OK, so it is illegal to give money away but not illegal to earn money.
1 wakeful night of 10hrs could easily be £100.00.
Bankholidays, wk-ends or emergency cover at short notice could be double that.
Employing privately a medically qualified staff to allow your Mother-in law to remain in the familiar surroundings of her own home is equally expensive.

You can be sure that if social sevices decide that she has enough assets to strip (erm.. utilise) then they will deem her in need of proper nursing as opposed to the standard care home. These homes are obviously more expensive, so less beds are available to the poorer members of the community and they can only be allocated a bed if Doctors make the assessment reflect a greater need.
Hense, in general a shorter life expectancy by the severely sick, unless the bed is funded privately and then the occupant will live as long as their money keeps them alive.
One only need to be on medication perhaps to qualify... obviously this is not actually completely true (just me bending, I mean expressing how the rules can sometimes be interpreted)
Therefore.. I would not be in the least bit suprised if social services decide that your family are not capable of looking after your Mother.
They will of course be acting in her best interests when they tell you that younger family members are giving inadequate care.
In short I doubt even if you and close family wanted to care for her I think it will be incredibly difficult to do so even leagally.

[ButtonMonkey]

As I understand it, trust funds were the loophole. But this was tighten-up a while ago.

EX

With most loopholes when one is closed another is found.

Most offshore tax offices has a department whose only job is to find loopholes to exploite.

[SVENUK]

Hi
thanks for all the input.
Had a long talk this weekend with MIL and she was not to happy about the situation .She has indicated that she will need to buy a few things to make her life more pleasent at her bungalow and at our home when she visits.
Will look into home care maybe for an hour morning /eve to help her.
She started spending her own money on sat - a nice new toaster £4.99 from Tesco's
Bless her cotton socks :D