1. Private & Confidential. Not for distribution. ©DWF LLP 2012 www.dwf.co.uk Go further Title needs degree sign (°) added from the “Insert/Symbol” menu. This needs to be added at 28pt compared to the 24pt title. Financial Planning with Trusts, Wills and Powers of Attorney ° Annie Pearson 20 November 2012

2. Private & Confidential. Not for distribution. ©DWF LLP 2012 www.dwf.co.uk Lawyers and Financial Planning Main areas of concern for clients Inheritance Tax Nursing Care Complicated Family Circumstances 2

3. Private & Confidential. Not for distribution. ©DWF LLP 2012 www.dwf.co.uk Title needs degree sign (°) added from the “Insert/Symbol” menu. This needs to be added at 28pt compared to the 24pt title. INHERITANCE TAX°

4. Private & Confidential. Not for distribution. ©DWF LLP 2012 www.dwf.co.uk Gifting is the best way to avoid IHT Annual Allowance: £3,000 saves £1,200 in Tax Potentially Exempt Transfer – “PET” Falls out of your estate for IHT purposes after 7 years Inheritance Tax 4

5. Private & Confidential. Not for distribution. ©DWF LLP 2012 www.dwf.co.uk Outright gifts to children or grandchildren not always appropriate –Age –Ability to manage finances –Increases the recipient’s estate for IHT and benefits means testing purposes Trust allows the client to retain an element of control and doesn’t affect the recipient’s capital position Can be adverse Tax consequences Inheritance Tax - Trusts 5

6. Private & Confidential. Not for distribution. ©DWF LLP 2012 www.dwf.co.uk A Gift into a Trust is a “Chargeable Lifetime Transfer” ≠ PET CLTs above Nil Rate Band attract 20% Inheritance Tax, rising to 40% if the Donor dies within 7 years CLTs are cumulative for 7 years CLTs can affect the Tax treatment of subsequent PETS –If a client is planning to make a series of PETs and CLTs, the PETs should be made first. 10 Year Charges and Exit Charges Potentially unfavourable Income Tax and Capital Gains Tax treatment Trusts – IHT consequences 6

7. Private & Confidential. Not for distribution. ©DWF LLP 2012 www.dwf.co.uk Transferable Nil Rate Band removes the need for IHT planning for many clients Opportunity to make best use of various reliefs – APR, BPR etc PoA allows the Attorney to continue to arrange client’s affairs tax efficiently in the event that capacity is lost. MUST BE SPECIFIC! Inheritance Tax – Wills & Powers of Attorney 7

8. Private & Confidential. Not for distribution. ©DWF LLP 2012 www.dwf.co.uk Title needs degree sign (°) added from the “Insert/Symbol” menu. This needs to be added at 28pt compared to the 24pt title. CARE COSTS °

9. Private & Confidential. Not for distribution. ©DWF LLP 2012 www.dwf.co.uk More concerning for many clients than IHT Around £550–600 per week = around £30,000 pa “Personal Care” (£163 p/w) and “Nursing Care” (£74 p/w) elements are not means tested but “Hotel” or “Accommodation Costs” are. Thresholds for government contribution towards Hotel costs element are £24,750 for limited funding and £15,250 for maximum funding Care Costs 9

10. Private & Confidential. Not for distribution. ©DWF LLP 2012 www.dwf.co.uk Following transfer there is no fixed period after which the house can’t be assessed Risky to gift outright – can be attacked by donee’s creditors Transfer will not be effective for Inheritance Tax purposes – Gift with Reservation of Benefit Clients have to choose whether or not to take the gamble Care Costs – Transferring Property 10

11. Private & Confidential. Not for distribution. ©DWF LLP 2012 www.dwf.co.uk House is disregarded while a spouse (or other dependent) is living there –Most “asset rich, cash poor” clients will qualify for some level of funding If house passes to survivor on first death the whole value will become assessable should the survivor need care If half share of house is passed elsewhere only half of the house’s value will become assessable if the survivor needs care Care Costs - Wills 11

12. Private & Confidential. Not for distribution. ©DWF LLP 2012 www.dwf.co.uk Allows the Attorney to consider how best to fund care Without them it’s likely that a Guardianship Order will be required Costly, emotionally draining and time consuming Billy Jones and his parents –Whole house ended up in the name of incapax Mr Jones –Council ceased funding care –Care home had to be paid but no liquid funds –Mr Jones couldn’t sign a disposition and had no PoA Care Costs – Powers of Attorney 12

13. Private & Confidential. Not for distribution. ©DWF LLP 2012 www.dwf.co.uk Title needs degree sign (°) added from the “Insert/Symbol” menu. This needs to be added at 28pt compared to the 24pt title. QUESTIONS? °

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