Investing parent’s money?

Hi Edna,

Estate Planning is a very complicated area and I would always recommend you seek professional insured advice before you commit to any plans.

You definitely need assistance though as from my Layman's understanding any gift over £3000 per year is considered a Potentially Exempt Transfer (PET) and subject to possible taxation over seven years. Hence Plan 2 worries me.

I know we have some expert IFA readers and Solicitors on the site who I hope can help 🙂

Also, I don't think the £72k care cost cap is as straightforward as it might appear.

Reply to the comment left by "Jerry Jones" at "22/04/2014 - 14:41":

Hi Jerry,

No I think your right as I have heard phrases like "deprovision of funds", but as I say I am not a professional in this area.

Hello Edna, will the care be paid out of your parents pocket. Or will the government be paying for your mother's care. Regards

I agree with Neil.

Another thing worth checking is any tax implications of providing rent free accommodation. It might be deemed that the income you should be getting is taxable. I could be wrong on this, but surely worth checking.

The £72k cap care cost is very misleading. This care is for the nursing care element, not for the "accommodation". So for a weekly cost in a nursing home of £1,000. only around £250 of that will be for the nursing care, the rest will be for accommodation, food etc. Therefore the £72k cap would mean a person would have to be in care for over 5 years before it was breached- longer than the average stay in a nursing home. Meanwhile, in those 5 years + a further £200,000 will have to be paid for the "accommodation" costs if the person is self-funding.

Moral of the tale is to hop into a TARDIS, whizz back 5 years and put their assets into a trust. This means that they will not get to listen to carers telling them how they do the same for some other clients who pay nothing for the service because they made sure they spent every penny they earned.

Reply to the comment left by "Yvette Newbury " at "22/04/2014 - 15:02":

Edna, having just read your post again I can see you are aware of the additional costs over and above the £72k. Option 1 - presumably you don't have an issue with CGT you may have to pay on the sale of the property? Any payment to you eg. £200k you mention would be added back to your parents estate in the event of their death if it were within 7 years of the gift, but it doesn't appear as if IHT is your issue. In the event your mother needed to go into a care home the local authority would look at your parents assets and ascertain whether any had been gifted or passed on purposefully to avoid self funding. If they discover this is the case, the sale of a house, for example could be added back onto their assets. However, in your case your mother would be self funding assuming she has the £72k+ set aside (I believe the cut off point for self funding is around £23k+). Your parents property, should they both live together in your Option 1 would be disregarded for this assessment assuming your father was still living there so could work. I can't help feeling there is a problem with your Option 2, mainly in providing accommodation rent free and the gift to you of £200k, but cannot think of specifics right now. Remember as you are thinking through this that you will need £72k+ for EACH of your parents, in the future.

We have recently been through care costs etc for my mother-in-law hence the detail!

I can relate to the info given by Yvette, speaking as a family member of a parent who has had to go into a care home (Dad already passed away so the £250k value of their home was spent in care fees in just 5yrs approx, she is now funded by the LA). When the local authority assess/consider fees, that is should your mother need to go into a care home, they will consider the 7 year rule, and decide if any steps were taken to deprive themselves from any assets. So long as one spouse survivals the other in the jointly owned house, they do not consider this as a asset when considering fees. As mentioned somewhere in the trail, it is a minefield. I suggest googling Age UK's factsheet on 'deprivation of Assets, they are also a very good supply for info on this as a starting point. And, yes we would make good use of the TARDIS, if only.

Thanks for all your replies.

My mother lives with my father in my rental property. She has lost the use of her left side and cannot stand or sit up unaided. My father has mild alzheimers. They are looked after by all the family plus two carers four times a day. It is difficult to see how much worse she could get so that we could no longer keep this arrangement - I'm thinking anything else and she will be in hospital - no funding issue. My father could need nursing home care if he deteriorates badly, but at 88 with other health issues there probably isnt going to be time for that.

Inheritance tax wont be an issue.

In these circumstances I think the 72k cap on what could be taken from my mums assets is all i need to worry about. I take your point about my dad though.

Maybe option 1 is less hassle....