Is there a conflict between Long Term Care and Inheritance Tax Planning?19 May 2020
The current crisis reported in UK care homes has been tragic as the Covid-19 pandemic has taken hold over the last few months. Unforgiving in its grip, the older generations seem to have suffered significantly from the effects of the virus. However, as you might anticipate, the costs of providing long term care have not reduced.
Conflicts of interest within financial planning don't come up very often for an individual; however, one area that does engender concern is the issue of providing for the potential need for long-term care, whilst also looking at ways to reduce the effects of inheritance tax.
On the one hand, the need to cater for the costs of long-term care (as a rough estimate, around £1,250 per week in the South East / £65,000 pa – and that's out of net income) really does focus the mind on financial planning. On the other hand, the objective of reducing any liability to inheritance tax, charged at 40% above the nil rate band (and now with the residence nil rate band if applicable), possibly by gifting money away in good time, usually seven years to fall outside the estate, does not normally combine well with long-term care cost planning. Gifting assets away to save inheritance tax is common. However, if financial support is then sought from the local authority for care costs, the gifting can be seen as 'deliberate deprivation of assets', a specific term, and the gifting can be (and is likely to be) challenged by councils to cover their costs.
For reference on what to consider when paying for care costs, Age UK has produced various fact sheets. Two produced in April and May 2020 (Factsheet 10 and Factsheet 46) are very helpful in looking at the issues of paying for care, either at home or in a residential care facility. A link to these can be found here:
And May 2020 here:
It is important to assess the assets and income available, both now and into the future. Circumstances can and do change, and this may affect allowances available, such as Attendance Allowance. Attendance Allowance is paid at two different levels (lower and higher rate) and how much you get depends on the level of care that you need because of your disability. Attendance Allowance currently offers £59.70 or £89.15 a week to help with personal support and more can be found at the following Government website: https://www.gov.uk/attendance-allowance/what-youll-get
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Taking advice on the issues at hand from an adviser qualified to deal with the issues above is important with the aim of achieving all that is possible, particularly with the emotional issues that are long-term care and inheritance tax planning. Both Keith Churchouse and Vicky Fulcher hold suitable qualifications to help with both issues.
No individual advice is provided during the course of this blog.
Keith Churchouse FPFS
CFP Chartered FCSI
Chartered Financial Planner
Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899