1. Planning Ahead

2. Capital Limits Introduction Why plan ahead?
Potential threats to your Estate
Bloodline Planning
Protect your home from being sold to pay for care
Generational IHT
Planning ahead for incapacity

3. Capital Limits Why Plan Ahead?
1 in 4 people are likely to require care in later life
In the past 5 years 100,000 homes have been sold to fund care fees
750,000 people in the UK have dementia
An estimated £1.3bn a year is paid by people who do not take action to mitigate against IHT

4. Potential Threats to your Estate
Capital Limits
Potential Threats to your Estate
Costs of care
Remarriage
Divorce
Creditors
Inheritance Tax

5. Joint Ownership
Bloodline Planning

6. Bloodline Planning Bloodline Planning
Son and daughter inherit £500,000 equally from Mum through her Will or in her lifetime by gifting
Daughter
Son
£250k
£250k
Hand out tech sheet 1

7. Bloodline Planning
Daughter divorces and the son’s business goes bankrupt
Of the original £500,000 inheritance, only £125,000 is left
Daughter
Son
£125k ?
£125K is “lost” to the “outlaw”!
Anything left???
Daughter divorces. “Husband” makes claim on daughters estate, which includes her inheritance from Mum.
Son’s business then goes bankrupt. Creditors make claim on him for the debts

8. Bloodline Planning Bloodline Planning Mums Trusts
If Mum had used Trusts
Son and daughter are beneficiaries of Mums Trusts (plus the grandchildren). Trust Funds cannot be claimed against by beneficiaries spouses or creditors.

9. Protecting The home from being sold to fund care fees
Joint Ownership
Protecting The home from being sold to fund care fees

10. Capital Limits and care home fees
Capital Limits are used to asses a persons ability to pay for Care.
Lower limit £14,250 Local Authority pays for all Care.
Upper Limit £23,250 person pays for their own Care.
Between these limits fees part paid by Local Authority and part by client

11. Care Planning Long term care Fees
With the average care home costing between £800 and £1000/week it doesn’t take long to lose your entire life’s savings.
And remember your family home can be assessed
for care and you may be forced to sell that too.

12. Care Planning-The Family Home
When can the value of your house NOT
be assessed for care?
Care Planning-The Family Home
Surviving spouse or partner still living in house
Relative over the age of 60 still living in property
Incapacitated relative still living in the property
A child under 16 for which you are liable to maintain
Age Concern Fact Sheet 38 page 3

13. How can you protect your assets from care fees?
Care Planning
How can you protect your assets from care fees?
To prevent your families inheritance being wiped out to pay for care you must reduce the valuation of your assets below the £14,250 limit at the time of entering Care.
How do we achieve this?

14. Joint Ownership Joint Ownership Mr Mrs
For most people their main asset is their family home
This is how most people own their own property

15. What happens if one person dies?
Joint Ownership
What happens if one person dies? Mr
Mrs
Becomes Sole owner
Mr Dies

16. Mrs now requires long term care
Joint Ownership
Mrs now requires long term care
Mrs
Is taken into long term care
Her sole assets and income are assessed.
This includes the Family Home.
Home sold to pay for care?

17. What’s the solution??? ?

18. Mr & Mrs “own” 50% of the home each
Sever The Tenancy
Sever the Tenancy Mr
Mrs
Mr & Mrs “own” 50% of the home each
SEVER THE TENANCY

19. Sever The Tenancy Mr Mrs Their share goes into a family trust
Mr dies. His will directs his share of the house into his Family Trust.
Wife and bloodline are beneficiaries of late husbands Trust
Trust Funds are protected from care costs, divorce etc

20. What happens NOW if Mrs needs Long term care
Sever The Tenancy
What happens NOW if Mrs needs Long term care
Mrs
- Mrs now requires care.
- Her assets are assessed including the home
- She only has interest in 50% of the home
- In these circumstances the value of the interest, even to a willing buyer, could be very low or could effectively be nil.
- CRAG suggests the value of a joint interest in property will be heavily influenced by whether the joint owner or another interested party is willing to buy the residents share.

21. Care Planning-The Family Home
If the couple Sever the Tenancy of the family home what is the value of the survivors half after 1st death?
Nil!
Age Concern Fact Sheet 38 page 11

22. Part Share Valuation of Property
What does the Government say about this?
The Government’s Department of Health’s documentation states:
“Where an interest in a property is beneficially shared between relatives, the value of the resident’s interest will be heavily influenced by the possibility of a market amongst his fellow beneficiaries. If no other relative is willing to buy the resident’s share it is highly unlikely that any ‘outsider’ would be willing to buy. The value of the interest, even to a willing buyer, could in such circumstances effectively be NIL.”
Source:- Charging for Residential Accommodation Guide (CRAG) Section

23. Generational Inheritance Tax Planning
Joint Ownership
Generational Inheritance Tax Planning

24. Part Share Valuation of Property
Single Person - IHT
Mr divorced, has Estate of £1m and one daughter
Dies 2009/2010 Tax year so:
£1 million – 1NRB = £675,000
x 40% = £270,000 IHT Net Estate Remaining = £730,000
Will passes inheritance absolutely to daughter

25. Part Share Valuation of Property
What happens to the IHT liability of future generations???
Part Share Valuation of Property
Daughter has her own estate valued at Nil Rate Band. She has one son.
Her Estate has increased by £730,000 from her Dad’s inheritance.
She dies. Her Estate over the Nil Rate Band is worth £730,000
IHT payable on her death = £730,000 x 40%
= £292,000 IHT

26. Part Share Valuation of Property
Benefit of the use of Trusts
In 2 generations £270,000 + £292,000 paid in IHT
So of the original £1,000,000
Only £438,000 remains for the Grandson
If Dad had used Trusts and named his daughter and grandchildren as Beneficiaries…
£730,000 would remain!

27. Plan ahead for incapacity with a Lasting Power of Attorney
Joint Ownership
Plan ahead for incapacity with a Lasting Power of Attorney

28. Part Share Valuation of Property
What is a Lasting Power of Attorney?
Legal document in which you can appoint someone you trust (your attorney) to make decisions for you should you lose capacity in the future
You can choose more than one Attorney
Lasting Power of Attorney for Health and Welfare
Lasting Power of Attorney for Property and Financial Affairs

29. Part Share Valuation of Property
Property and Financial LPA
Operate your bank accounts
Claim your benefits, pensions and allowances
Pay your bills
Buying and selling property

30. Part Share Valuation of Property
Health and Welfare LPA
Give or refuse consent to types of health care
Whether you stay in your own home
Whether you move into a care home
Which care home is appropriate for you
Daily routine, dress and diet

31. Part Share Valuation of Property
Don’t Leave it until it’s too late
You can only make a Lasting Power of Attorney if you have mental capacity
If you don’t have a Lasting Power of Attorney your family have to apply for deputyship through the courts
Applying for Deputyship – costly and expensive

32. Joint Ownership
Any questions???