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Where Taxpayers and Advisers Meet

Paying care home fees for relative

seasider1b
Posts:6
Joined:Fri Apr 01, 2022 12:43 pm
Paying care home fees for relative

Postby seasider1b » Sun Jul 31, 2022 12:14 pm

I paid a contribution each month to my late mother's care home fees for the last 18 months of her life. She had insufficient monthly income to pay the fees, although she did own her bungalow, which was put on the market once it became clear that she would not be able to return to it, but did not sell during her lifetime.

I held a financial POA over her affairs throughout the period in question. The total of the payments amounts to in excess of £20k, on which IHT will be payable if relief is not given. At all times I acted in her best interests. There was no formal loan agreement in place although I have kept good records of each and every payment. I realise that this amount will need to go on IHT419, but i wondered if any practitioners could give me any guidance as to whether to show the amount under s1 of IHT419 "Money spent on the deceased's behalf" or s2 "Loans and liabilities". Obviously I want to maximise the chances of relief being granted. This must surely be a fairly common situation yet the guidance does not seem to cover this.

I would be most grateful for any assistance please in terms of presentation and/or description.

AGoodman
Posts:1738
Joined:Fri May 16, 2014 3:47 pm

Re: Paying care home fees for relative

Postby AGoodman » Mon Aug 01, 2022 3:13 pm

Yes, it can be claimed and no, there is no need for a formal loan agreement. If you thought it was a loan then, given you were on both sides (once personally and once as POA) then that is pretty good evidence you expected it to be repaid.

I'd use s.1 if you paid the money direct to the care home and s.2 if you first paid the money into your mother's account.

Incidentally, are you sure you are using both the regular (£325k) and residential (£175k) nil rate bands? (times two if your mother was a widow and her late husband left everything to her). This has potential to cover £1m of assets.

seasider1b
Posts:6
Joined:Fri Apr 01, 2022 12:43 pm

Re: Paying care home fees for relative

Postby seasider1b » Mon Aug 01, 2022 3:43 pm

Thank you for that most helpful response. It was always intended to be a loan; indeed it was partially repaid at one point when she had a fixed term ISA maturity. My thinking when loaning her the money was to avoid penalties on early encashment of her fixed term bonds and ISAs by me lending her the money temporarily until these matured, and thus make her limited funds last longer. I have full records of all the transactions though there is no formal loan agreement (which i would have had to sign on behalf of both parties!)

Thank you also for the guidance re the nil rate bands. She was divorced in the late 1960s, and we have had no contact from my father since then and I therefore have no idea whether he is still alive. I presume there is some time limit on claiming RNRB anyway in such cases!

Thanks again for the steer. Much appreciated.

AGoodman
Posts:1738
Joined:Fri May 16, 2014 3:47 pm

Re: Paying care home fees for relative

Postby AGoodman » Tue Aug 02, 2022 1:44 pm

If there is movement back and forth, I'd be tempted to put the final balance in s.2 and then if HMRC ever query it you can send them the schedule of debits and credits.


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