Money
Our experts
Q&A: Premium Bonds, National Savings Certificates, care
In his regular Money Clinic Q&As, Saga money expert John Husband answers your personal finance questions:
Q. My husband and I both have children from previous marriages. The gift allowance for inheritance tax purposes is £3000 per year. Does this mean all the children must share the £3000, or can I give £3000 between my two children and likewise my husband give £3000 between his?
John Husband answers: The limit is £3,000 a year per donor. So you can each donate £3,000 in total. You can make other unlimited gifts but these risk attracting inheritance tax if you die within seven years of making them.
Q. I was widowed a few months ago and have about £70,000 from my late husband's estate to invest. How can I invest this to avoid tax? I shall purchase some Premium Bonds and a cash ISA but that will leave about £40,000.
John Husband answers: You could invest the rest in National Savings Certificates and Index-Linked Savings Certificates which also do not need to be declared for tax. However, these are not necessarily the best investments for you.
While it makes sense to take account of tax when investing, you should not let it cloud your judgment. It is better to achieve a higher return net of some tax rather accept a lower tax-free return. I suggest you talk to an independent financial adviser who can suggest ways to maximise you income.
Q. My mother had to sell her house to meet the fees when she went into care. She has left me to handle her estate worth about £200,000. She would like to make regular cash gifts to her children and grandchildren, for birthdays and Christmas, for example. Are there any limits on the amounts she can give them?
John Husband answers: There are limits which would apply if her estate exceeded the Inheritance Tax threshold, currently £285,000 and due to rise to £300,000 in April. That would not apply in her case so in theory she can give away as much as she likes.
However, as her care fees are being funded from her savings she could be in serious trouble if she deliberately gave away so much that she could no longer afford to meet the fees. If she is keen to give a lot away it might be worthwhile buying an immediate care annuity to fund her fees leaving her free to do what she wishes with the rest of her savings.
