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Is there a conflict between Long Term Care and Inheritance Tax Planning?

01 February 2024

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.

We are aware that there is much speculation in the press that the Chancellor may make changes to inheritance tax charges in his Budget in early March 2024, and we plan to send our clients and contacts a tax card after his announcement to help update the position looking forward.

On the one hand, the need to cater for the costs of long-term care (as a rough estimate, approximately £1,500 per week in the South East / £78,000 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 2023 (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 2023 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 £68.10 or £101.75 a week to help with personal support for those over State Pension age, and more can be found at the following Government website:

Chapters Financial is not responsible for the content of external websites.

Taking advice on the matters at hand from an adviser qualified to deal with the topics above is important with the aim of achieving all that is possible, particularly with the emotional issues that are involved in long-term care and inheritance tax planning. Please do contact us if you would like to discuss your own situation, or that of a relative.

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

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