Wills, taxes and other complications including when family reside overseas

[Seat0B]

The impact was an increase in her nursing home fees.

Do you know if this was because she lost the "homeowner" benefit by selling the house and they just counted the proceeds as an asset even though the money was given away? Or some other complication?

The whole calculation of aged care fees v assets v income is a non-transparent mire. I know there are calculators you can use to get an estimate, but it seems hard to get a clear idea of the impact of various courses of action on the nursing home fees. We are looking at exactly this sort of issue right now for 92 year old FIL. He still has a part share in former business premises with the other part now in the hands of my MIL's testamentary trust (the trustees are my hubby and his 2 sisters) and they are trying to work out if he is better off to just gift the balance of the property to them now (they will get it in his will) or to wait.

 

[zig]

Great new thread @Seat0B - very informative. I'll check out the recommended book.

 

[Seat0B]

Don't forget as well there are 5 yearly limits on gifting if you want to avoid extra taxation.

Based on advice from our accountant, I think in Australia gifting is fine at any time and the gifted asset does not attract taxation in the hands of the recipient- however, any income generated from that asset (eg rent, interest, dividends etc) or capital gains on sale of the asset are treated as income in the hands of the recipient and taxed at the marginal rate.

However, any asset gifted within the last 5 years is still deemed to be in your possession by Centrelink for things like the asset test for Aged Pension. And once you are a Centrelink recipient, you may only gift $10,000 per year and have it removed from your assets. You can of course gift any amount at any time, but they will still count amounts over $10k per year as an asset for the purposes of determining if you meet the asset test for that benefit.

Edited to add the bolded words for clarity.

 

[Seat0B]

I had an inheritance a couple of years ago from a close friend in the UK. Because she had no immediate family we had to pay 40% inheritance tax in the UK. She also owned a house in France and the French (because they can) don't recognise the validity of the English will. The palaver went on for over two years. In France if you want to inherit a house you have to pay the inheritance tax before you can take over the house (I think it was 60% but it may have been a bit lower) I suppose if the French want to have such a great welfare state someone has to pay for it

Too late for you and your friend, but for others, as per info at the links in my post #4 up thread, France is a country that recognises an international will as long as it meets the specific requirements including special type of signing arrangement. In the absence of that, as you found out, you need a local will.

According to Seat Son (who does have legal experience in this area), that is something that really catches people out especially when:

• they have forgotten about the existence of the asset eg a bank account or pension benefit from years ago.
• the inheritance laws are very different to what you might expect as an Australian eg some countries prioritise sons or even the first son - certainly over daughters, and sometimes even over widows - because the son is expected to take care of his mother and unmarried sisters. The married ones are taken care of by their husnband so don't need money.
• there are inheritance taxes to be paid but the beneficiaries don't have the money and are not allowed to take conrol of the house (so cannot sell it) until they have paid the taxes- read in the news recently about Akiya (empty hpuses) ion Japan and this is one of the main causes.
• they can't be bothered because it is too expenive or too hard, especially if they do not speak the local language, so it becomes a mess for the executor/beneficiary.

Seat Son's tip - if you can execute an international will, please do so. If your country is not covered by international will, please get a local will for the assets in each country.

 

[mrsterryn]

@Seat0B

Because she gave away an asset over the allowable limit as you mentioned above. Mum was actually on DVA war widows , with private income as well. The deprivation of the asset was assessed . Note mum was in care prior to July 2014 and was under those rules. Which have changed twice I think since then. Though nowadays (not sure about then ) there are annual and lifetime caps

 

[Seat0B]

@Seat0B

Because she gave away an asset over the allowable limit as you mentioned above. Mum was actually on DVA war widows , with private income as well. The deprivation of the asset was assessed . Note mum was in care prior to July 2014 and was under those rules. Which have changed twice I think since then. Though nowadays (not sure about then ) there are annual and lifetime caps

Thanks for the reply @mrsterryn

It just seems so mean and miserly to treat older people like this. I know the money has to come from somewhere, but it is very difficult for older people - so complex, many times the family don't understand the rules/system either - I know it has all but sucked the life out of me trying to understand how it all works and get reliable ideas of costs under different scenarios. I think many people probably just throw their hands up and do whatever the provider recommends, even if that is not the best decision financially.

 

[clifford]

It's quite complex for sure even without the added complications of family being in different countries.

And, of course, half my family is in the UK (I'm a dual AU/UK citizen with assets in both places).

 

[tgh]

This subject is a real minefield..
I opine the the first thought should be philosophical ; what to do with assets at death.
In my case I provided well for my kids and they set out in life well funded and well prepared.
Should I (we) now give then the remains from my (our) well spent life.. or would ( for example) a medical research donation be more appropriate ?
If we pass in our late 80's they will be in their late fifties ..what will a heap of money do for their life ?
Leads to… Grandchildren coming into a more challenging world, how to help them ?
We already maintain a fund for each grandie and this seems a fertile avenue for adding value to lives..

more to follow as the conversation flows...

 

[mrsterryn]

@Seat0B Aged care costs seem to become more and more complex as the years go on. However I actually understood the system at the time and we did use the rules appropriately. We didn't want to rent my parents place out , the rental and post death tax implications just were too hard to consider.
The property was always coming to me, as I said previously the only note of contention with mum was I said son was going to receive half of the funds . Husband and I didn't need the funds for a home , son did . Mum's nursing home was on the more expensive side and so so worth it
After Dad's death I realised what assets they had and grumped at my father. I remember him saying once he had to save for a rainy day.
I won't . My son had a significant inheritance early he will inherit a property and some cash. There are a few valuable assets that will go to him and mementos to his two sons.
We are far more "death" organised than my parents.
Apart from a few particular items that wouldn't take up 1/5 of a room my son and his family can bin the lot though there is a Lego room lol that part is unlikely to be binned

 

[Freq Flier 2013]

I had financial power of attorney over my grandmothers affairs and it made things much easier when dealing with all financial institutions.

 

[LadyC]

Based on advice from our accountant, I think in Australia gifting is fine at any time and the gifted asset does not attract taxation - however, any income generated from that asset (eg rent, interest, dividends etc) or capital gains on sale of the asset are treated as income in the hands of the recipient and taxed at the marginal rate.

Caveat of this is not tax advice but general in nature - Maybe if you are gifting cash but if you are still alive and gifting a non-fungible asset, eg shares or real property, it would usually be subject to taxation as if the gift had been sold to a third party at market value. There are special tax rules around when assets pass due to death/inheritance hence why usually no tax on asset transfer. Definitely seek specific tax advice if considering gifting assets to children whilst still alive.

 

[Seat0B]

Caveat of this is not tax advice but general in nature - Maybe if you are gifting cash but if you are still alive and gifting a non-fungible asset, eg shares or real property, it would usually be subject to taxation as if the gift had been sold to a third party at market value. There are special tax rules around when assets pass due to death/inheritance hence why usually no tax on asset transfer. Definitely seek specific tax advice if considering gifting assets to children whilst still alive.

Thanks for that comment @LadyC - I'm guessing that giving assets probably breaks the "arm's length dealing" concept for the person giving away the asset, whereas cash...

I probably should have said does not attract taxation in the hands of the recipient - I know that's what our accountant meant.

 

[Seat0B]

This subject is a real minefield..
I opine the the first thought should be philosophical ; what to do with assets at death.
In my case I provided well for my kids and they set out in life well funded and well prepared.
Should I (we) now give then the remains from my (our) well spent life.. or would ( for example) a medical research donation be more appropriate ?
If we pass in our late 80's they will be in their late fifties ..what will a heap of money do for their life ?
Leads to… Grandchildren coming into a more challenging world, how to help them ?
We already maintain a fund for each grandie and this seems a fertile avenue for adding value to lives..

more to follow as the conversation flows...

It is indeed.

My mum, with my "blessing" (noting that her money was never mine to start with), will leave half her estate to my kids, and the other half to my sister. I feel lucky that I do not need anything financial from her, and it will be great that it goes to my kids while they still have mortgages to pay off. That in turn means that my grandchildren will be born and raised in better financial circumstances, so their lives will be better than they would otherwise have been.

My sister however has different financial position to me, and does need an inheritance from mum to help her in retirement.

 

[Flashback]

Rather timely, as MSE in the UK only just yesterday did their (semi regular) reminder on these points - and as mentioned, Legal Power of Attorney can be more powerful/useful than having a will in place. Of course, it's definitely worth getting a will in place especially where multiple countries are involved. This has given me a lot more things to think about / have to start trying to plan against.

https://www.moneysavingexpert.com/tips/2023/11/21/

 

[Pushka]

This subject is a real minefield..
I opine the the first thought should be philosophical ; what to do with assets at death.
In my case I provided well for my kids and they set out in life well funded and well prepared.
Should I (we) now give then the remains from my (our) well spent life.. or would ( for example) a medical research donation be more appropriate ?
If we pass in our late 80's they will be in their late fifties ..what will a heap of money do for their life ?
Leads to… Grandchildren coming into a more challenging world, how to help them ?
We already maintain a fund for each grandie and this seems a fertile avenue for adding value to lives..

more to follow as the conversation flows...

With the level of debt acquired through cost of homes I'm expecting middle aged children to have debts well into their sixties. We have set up two savings accounts for the grandies and we add money each week. Also written in the will. Plus we both have bequests to our two favourite charities. Mine will go to an Animal Care fund.

 

[Seat0B]

Seat Son decided to give up his bonus US citizenship (acquired only because he was born there while we were on military posting) because the taxation reach of the IRS is very long. As a US citizen, he was liable for tax on income earned anywhere in the world, which was not attractive given his earning power in the untaxed UAE. He had been preparing and lodging US tax returns for about the last 4 years from when he triggered the threshold for paying tax. There are other issues with US taxation too - as he is a potential beneficiary under the testamentary trust established on his grandmother’s death a few year back, technically that trust was required to submit its financial records to the IRS as well. Even though he has not ever received any funds from the trust (wanting to minimise his ties to Australia so he is not seen as an Australian Tax Resident and thus up for tax here). Very messy and complicated.

Some details about giving up US citizenship.

1. First thing required is a certificate from IRS that you are in good standing, with no unpaid tax arrears or fines etc. Then you have to put in and pay a final tax return. For this reason, many people find it easier to align renunciation of citizenship with the tax year.
2. then you have a preliminary interview at the US Embassy in which they basically try hard to talk you out of it. If they feel like you really mean it, they start to investigate your ties to the US eg property ownership (no), family residing there (no), study there (no), work history there (no), registered voter (yes), number of visits to the USA (about 5 in his lifetime all for tourism), strength of your perception of yourself as an American (weak). They get you to sign up to them investigating all that. I don’t know what the relevance of all that is, as I expect you should be able to renounce even if you do have history in the US? You also have to provide a wodge of documents like your US birth certificate, US passport, and a certified copy of any other passports you hold. Plus you have to fill out a form requesting loss of citizenship and give an “informed consent” acknowledging all the consequences of renouncing.
3. you pay the fee to renounce which was about AUD 3,500
4. then you wait, and wait and wait.
5. they call you back for another grilling and another try to talk you out of it. You sign a record of that meeting.
6. then you wait some more.
7. have final meeting where you swear an oath of renunciation. They give you back your birth certificate and your cancelled US passport.
8. you are no longer a US citizen.
9. IRS can still chase you if it concludes you owe it money and if you don’t pay you will not be be to get a visa or ESTA for any future visit to the US until you pay

There was a final layer of complexity for Seat Son in the UAE. When he arrived in the UAE in 2017 he elected to get his work visa and residency permit in his US passport as the conditions were easier and the fee was cheaper than getting it in his Aus passport, and his work required that he spend the cheaper amount. So before starting the renunciation process he had to arrange to have his work visa and residence permit changed over to his Aus passport. As you might guess, this was NOT an easy task. Again he was grilled by both his employer and the UAE government officials about what was going on, why he had 2 passports, why on earth he was giving up something as “valuable” as US citizenship and so on. The process to get the transfer involved cancelling his old visa and residency and issuing new ones into his Aus passport, and these had to be activated by entering the UAE from abroad using the Aus passport. He was specifically told he could not achieve this goal by entering from Oman and it had to either be from somewhere in Aus or from the last place he entered outside the UAE using his Aus passport - which happened to be the UK. So he persuaded his work to let him work from home for a week in their UK office, paid his own air fare, tacked on some leave to see friends and took a trip down memory lane by spending a week in a glass tower at a large law firm in London to remind him why he left in the first place .

Finally, it seems that the US will let you renounce your citizenship even if you DON’T have another passport, and thus render yourself stateless. The don’t want you to do that, but if you really insist, they will allow it.

In all this process took him about 15 months to complete. What a palaver.

 

[Pushka]

There was a different thread around here but maybe this will fit.
Son living overseas has a HELP debt or whatever it's called now, and has earned enough income overseas for that to kick in. He's received his first overseas tax bill for this debt and that has bpay details to pay it etc. so that's sorted.

He also has a residual HELP. I'm presuming if he uses the same PRN then that will work to pay down that bill too? I'll keep trying to find the more relevant thread but hopefully someone here knows.

@Flashback - maybe you might know?

 

[Flashback]

There was a different thread around here but maybe this will fit.
Son living overseas has a HELP debt or whatever it's called now, and has earned enough income overseas for that to kick in. He's received his first overseas tax bill for this debt and that has bpay details to pay it etc. so that's sorted.

He also has a residual HELP. I'm presuming if he uses the same PRN then that will work to pay down that bill too? I'll keep trying to find the more relevant thread but hopefully someone here knows.

@Flashback - maybe you might know?

Pass, sorry! I paid mine as I studied so didn't leave with a debt.