Variation or PET?

[Pheidippides]

Quick summary:

Late FIL Estate = a fraction under the £325K limit, MIL still very much with us (83).

The intention is to split the estate (Total £650K, £400K House, £250K Cash) into 3 1/3 each for Mrs Pheid and my two daughters.

My MIL would like to give the my girls the cash now (for mortgage)

She could vary the will and gift the cash now or keep the allowance and gift the cash as a PET. What are the advantages/disadvantages of both approaches?

Regards

Pheid

[Lootman]

A PET could presumably be regarded as a "deliberate deprivation of assets" should the MIL later need expensive residential care. Whereas a direct bequest from the FIL to the recipients would not. But could a DofV by the MIL be interpreted as a "deliberate deprivation" given that she is (presumably) the nominated beneficiary of the FIL's Will? I don't know but it's possible a LA might try and argue that.

Given that these assets are within the IHT nil-rate band, then there is an argument that it is better to do a DofV because that immediately and permanently utilises the nil rate band. If instead the assets are gifted later AND the MIL dies within 7 years AND the estate subsequently grows to be worth more than the 650K that is currently equal to two nil rate bands, then some IHT could be due upon the MIL's death. (And didn't you say in an earlier thread that she is well into her 80's?).

More generally I'd always take the tax-free option now because you never know when the IHT rules will be changed, and they might be changed for the worse. A bird in the hand, and all . .

[PinkDalek]

... But could a DofV by the MIL be interpreted as a "deliberate deprivation" given that she is (presumably) the nominated beneficiary of the FIL's Will? I don't know but it's possible a LA might try and argue that. ...

Yes, as Deeds of Variation are only effective for IHT and CGT purposes (presupposing the appropriate elections are made).

[melonfool]

A PET could presumably be regarded as a "deliberate deprivation of assets" should the MIL later need expensive residential care.

Not really - the wording seems to be:

"Deliberate deprivation of assets is where you have intentionally
decreased your overall assets, in order to reduce the amount you are
charged towards your care and support.
The local authority must show that you knew that you would need care
and support and that you have reduced your assets in order to reduce
the contribution you are asked to make towards the cost"

If MIL is well and has no reason to foresee future care needs (which she could not afford - there is still money in the estate in the form of the property), then I can't see why she would fall foul of this.

http://www.ageuk.org.uk/home-and-care/c ... provision/

(You need to open the PDF)

"(And didn't you say in an earlier thread that she is well into her 80's?)." - 83 in the OP.

Don't forget some IHT rules, especially around family homes, are changing soon - and keep an eye on today's budget - this may give new information to consider.

Mel