Mum holding my Brothers cash - impact on inheritance tax?
Discussion
Always a gruesome discussion but I'm keen to understand the situation here.
My elderly Mum is holding onto some cash for my brother (let’s call him Brian). He lives over in Australia and his relationship with his Wife is a little rocky so he has asked Mum to hold it to prevent his Wife from either spending it irresponsibly or just taking half and leaving. Mum has had the cash sat in her account for about 7 years so Brian is in no rush. Mum says that her will is clear that “The money in that particular account is Brian’s money”.
I’m keen to understand what impact this might have and how important it is to encourage Mum to get my brother to look after his own money. (Mum is annoyed at having to look after this money and I think Brian is a big boy and should look after his own finances)
How does this extra cash impact on the inheritance tax situation? Could I end up getting unfairly taxed? i.e. if Mum has written a clause on the will that “The £100k in account X is Brian’s and not part of my estate” would it also get taxed at 40%?
Alternatively, if the total estate turns out to be £325k, would Brian’s additional money mean I just lose a chunk in unnecessary tax?
My elderly Mum is holding onto some cash for my brother (let’s call him Brian). He lives over in Australia and his relationship with his Wife is a little rocky so he has asked Mum to hold it to prevent his Wife from either spending it irresponsibly or just taking half and leaving. Mum has had the cash sat in her account for about 7 years so Brian is in no rush. Mum says that her will is clear that “The money in that particular account is Brian’s money”.
I’m keen to understand what impact this might have and how important it is to encourage Mum to get my brother to look after his own money. (Mum is annoyed at having to look after this money and I think Brian is a big boy and should look after his own finances)
How does this extra cash impact on the inheritance tax situation? Could I end up getting unfairly taxed? i.e. if Mum has written a clause on the will that “The £100k in account X is Brian’s and not part of my estate” would it also get taxed at 40%?
Alternatively, if the total estate turns out to be £325k, would Brian’s additional money mean I just lose a chunk in unnecessary tax?
Simpo Two said:
What actual evidence is there that the money legally belongs to Brian?
I'm sure she said it is specifically mentioned in her will. Alternatively it will be noted in all her account information/paperwork and my Brother knows about it too. The account is in my Mum's name as she said my Brother can not have a UK account as he lives abroad.Take advice, I'm no expert, however I do know my dads tax passed to my mum meaning she left significantly more without tax implications.
Is your dad around, did he die whilst married to mum.
Either make sure the advice you get on here is from an expert, or go pay for it.
I'm glad I did.
Is your dad around, did he die whilst married to mum.
Either make sure the advice you get on here is from an expert, or go pay for it.
I'm glad I did.
dundarach said:
Take advice, I'm no expert, however I do know my dads tax passed to my mum meaning she left significantly more without tax implications.
Is your dad around, did he die whilst married to mum.
Either make sure the advice you get on here is from an expert, or go pay for it.
I'm glad I did.
Dad is still with us but they divorced many years ago. Mum's estate will be split between her 2 children. Is your dad around, did he die whilst married to mum.
Either make sure the advice you get on here is from an expert, or go pay for it.
I'm glad I did.
It isn't really my position to get any professional advice. I don't think Mum sees it as too much of an issue and if I don't do anything she will probably hold the money to the end. Hence, why I'm keen to see if it will make an impact.
FreeLitres said:
Simpo Two said:
What actual evidence is there that the money legally belongs to Brian?
I'm sure she said it is specifically mentioned in her will.Ean218 said:
First thought, if it is mentioned in the will that's highlighting the fact that it may not actually be your brothers. Why is she other people's assets in her will? Is there a proper paper trail showing where the money came from? I would get decent legal advice pronto.
To explain Brian's money - Mum received a previous inheritance and she kindly gifted it to us. I got my cash but she is holding Brian's due to his tricky relationship issues. That is only is sat in her account but she is gifting it to Brian as soon as he can receive it. dundarach said:
Take advice, I'm no expert, however I do know my dads tax passed to my mum meaning she left significantly more without tax implications.
Is your dad around, did he die whilst married to mum.
Either make sure the advice you get on here is from an expert, or go pay for it.
I'm glad I did.
Transfer of assets between a husband and wife are free from IHT (well all tax really) . It is only when the money passes a generation that it becomes subject to tax. Is your dad around, did he die whilst married to mum.
Either make sure the advice you get on here is from an expert, or go pay for it.
I'm glad I did.
OP I think you are on shaky ground, otherwise the world would be full of Parent holding onto money that ‘really belongs to their son’. Mentioning in the will, might work for the executors of the will, but probably not for the Revenue. Even proof that Brian gave her the money might not be sufficient. Since the IR might argue it could be money he owed her previously.
Much better for Brian to move the money back to his own name, but perhaps in an offshore account..
It could also be an issue if your Mum needs care now or in the future. Having a lot of cash, or appearing to have given away a lot of cash in the last few years, could mean that she has to pay for care that would otherwise have been funded by the council.
I'm not an expert, but I think the solution is to either put the money into an account in the brother's name, or to have written proof that Mum owes money to the brother. If the money is still owed when your Mum passes away, the brother can ask for the debt to be repaid from the estate. Any debts should be settled, and then any remaining assets are distributed in accordance with the will, so there's no need to mention the money in the will.
I'm not an expert, but I think the solution is to either put the money into an account in the brother's name, or to have written proof that Mum owes money to the brother. If the money is still owed when your Mum passes away, the brother can ask for the debt to be repaid from the estate. Any debts should be settled, and then any remaining assets are distributed in accordance with the will, so there's no need to mention the money in the will.
The reason the money is in mum's name is so Brian can deny that it's his in the event of his divorce, hence not losing any of it to his wife....unless mum dies in which case it IS his money and not mums.
Not sure you can expect to have it both ways. If the money is currently in her account, it's her money, and it's part of the estate when she dies, and can be grabbed by the council if she had to go into care.
Not sure you can expect to have it both ways. If the money is currently in her account, it's her money, and it's part of the estate when she dies, and can be grabbed by the council if she had to go into care.
The fact it’s in your mum’s name but it’s Brians money is irrelevant I think. It all just goes into one large pot and if cash,the house other assets are over £325 then iht is due.
Exceptions are married couples can pass their estate to the other along with the iht pot (assuming they didn’t give any away) which doesn’t apply in this case. The other one is an allowance if property passes to children.
But from what little i know, your mum holding onto on behalf of brian wont be seen like that by hmrc
Exceptions are married couples can pass their estate to the other along with the iht pot (assuming they didn’t give any away) which doesn’t apply in this case. The other one is an allowance if property passes to children.
But from what little i know, your mum holding onto on behalf of brian wont be seen like that by hmrc
TwigtheWonderkid said:
The reason the money is in mum's name is so Brian can deny that it's his in the event of his divorce, hence not losing any of it to his wife....unless mum dies in which case it IS his money and not mums.
Not sure you can expect to have it both ways. If the money is currently in her account, it's her money, and it's part of the estate when she dies, and can be grabbed by the council if she had to go into care.
This, dead simple. And for the next seven years I think, even if she divests of it it now. Not sure you can expect to have it both ways. If the money is currently in her account, it's her money, and it's part of the estate when she dies, and can be grabbed by the council if she had to go into care.
If your Brother has given your mum the money the executor could have noted it as a liability that needed repaying.
However it appears that it's actually money that's hers that she has yet to pass on.
Also unless your share of the inheritance went direct to you then it will count towards her estate on a reducing amount for 7 years.
However it appears that it's actually money that's hers that she has yet to pass on.
Also unless your share of the inheritance went direct to you then it will count towards her estate on a reducing amount for 7 years.
I will be the executor of the will as Mum's only living relative in the UK.
So in the eyes of the Tax man, this money ringfenced for Brian will just be lumped i with the rest of of the estate?
How much money do we send to Brian then? 50% of the total estate? That wouldn't go down too well. Who actually calculates the final values? The executor, or the solicitor?
So in the eyes of the Tax man, this money ringfenced for Brian will just be lumped i with the rest of of the estate?
How much money do we send to Brian then? 50% of the total estate? That wouldn't go down too well. Who actually calculates the final values? The executor, or the solicitor?
FreeLitres said:
I will be the executor of the will as Mum's only living relative in the UK.
So in the eyes of the Tax man, this money ringfenced for Brian will just be lumped i with the rest of of the estate?
How much money do we send to Brian then? 50% of the total estate? That wouldn't go down too well. Who actually calculates the final values? The executor, or the solicitor?
The executor.So in the eyes of the Tax man, this money ringfenced for Brian will just be lumped i with the rest of of the estate?
How much money do we send to Brian then? 50% of the total estate? That wouldn't go down too well. Who actually calculates the final values? The executor, or the solicitor?
If you are due to pay IHT i can't see how you can avoid it on this 100k
If no IHT and it's just you and him
He gets 100 and you both share the rest 50/50
If his arrangement with your mother costs you tax it would be fair for him to account for that tax. But that would be between you and him.
If you are the executor and you and your brother are the only beneficiaries you can agree to carve it up as you both see fit once the tax man has had their bit.
Two points worth checking:
Firstly, if Brian is in Australia, is he subject to Australian tax which I believe can be pretty far reaching - I.e. they do like to tax you on your overseas assets.
Specific to Australian law, is it possible for someone to keep an inheritance separate from their marital assets as it is in the UK? I.e. if you inherit money but keep it in a separate account, it isn’t considered as a marital asset on divorce.
Secondly, you mentioned that your mother received the funds as her inheritance and then ‘gifted’ the money to you both…
Perhaps worth checking what paperwork was raised at this time to double check if it was a gift from your mum, or the re-direction of the inheritance that she was in line to receive via a deed of variation of some sort?
It is possible to hold (and invest) funds for someone else under a bare trust arrangement but you need to create and maintain clear records of your intentions and actions as trustee.
Informally, your Mum could transfer the money to you so that it could ‘rest’ (!) in one of your accounts, but this W ould required another level of brotherly love / trust and it still wouldn’t solve your Mum’s potential IHT issue (if indeed she has one) if this transfer was indistinguishable from a new gift made in 2021.
Firstly, if Brian is in Australia, is he subject to Australian tax which I believe can be pretty far reaching - I.e. they do like to tax you on your overseas assets.
Specific to Australian law, is it possible for someone to keep an inheritance separate from their marital assets as it is in the UK? I.e. if you inherit money but keep it in a separate account, it isn’t considered as a marital asset on divorce.
Secondly, you mentioned that your mother received the funds as her inheritance and then ‘gifted’ the money to you both…
Perhaps worth checking what paperwork was raised at this time to double check if it was a gift from your mum, or the re-direction of the inheritance that she was in line to receive via a deed of variation of some sort?
It is possible to hold (and invest) funds for someone else under a bare trust arrangement but you need to create and maintain clear records of your intentions and actions as trustee.
Informally, your Mum could transfer the money to you so that it could ‘rest’ (!) in one of your accounts, but this W ould required another level of brotherly love / trust and it still wouldn’t solve your Mum’s potential IHT issue (if indeed she has one) if this transfer was indistinguishable from a new gift made in 2021.
Edited by Mogul on Sunday 21st November 20:24
Mogul said:
Two points worth checking:
Firstly, if Brian is in Australia, is he subject to Australian tax which I believe can be pretty far reaching - I.e. they do like to tax you on your overseas assets.
Specific to Australian law, is it possible for someone to keep an inheritance separate from their marital assets as it is in the UK? I.e. if you inherit money but keep it in a separate account, it isn’t considered as a marital asset on divorce.
Your brother's wife will be entitle to some of it if its in his name anywhere in the world if she knows about it. From a Aus tax side of things, he should be ok as its not in his name and he's never actually had it at anytime. if it was in his name at anytime and he gave it to your mum then it might be a little be tricky but i suspect that wouldn't be a problem though.Firstly, if Brian is in Australia, is he subject to Australian tax which I believe can be pretty far reaching - I.e. they do like to tax you on your overseas assets.
Specific to Australian law, is it possible for someone to keep an inheritance separate from their marital assets as it is in the UK? I.e. if you inherit money but keep it in a separate account, it isn’t considered as a marital asset on divorce.
Edited by Mogul on Sunday 21st November 20:24
Mogul said:
Informally, your Mum could transfer the money to you so that it could ‘rest’ (!) in one of your accounts, but this W ould required another level of brotherly love / trust and it still wouldn’t solve your Mum’s potential IHT issue (if indeed she has one) if this transfer was indistinguishable from a new gift made in 2021.
This is the best way but the 7 yr IHT gift rule will still apply but your brother's wife won't get her hands on it.Edited by Mogul on Sunday 21st November 20:24
Edited by onny on Sunday 21st November 22:26
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