Investing into a trust when you go into care
Financial Advisers Advice
I recommend you place capital into trust now that you are going into care. This will take the capital outside the estate for InheritanceTax and long term care…
Expert’s advice: Score 0 out of 10.
Unfortunately not. This is actually deliberate deprivation of capital.
There are a few ...
Financial Advisers Advice
I recommend you place capital into trust now that you are going into care. This will take the capital outside the estate for InheritanceTax and long term care…
Expert’s advice: Score 0 out of 10.
Unfortunately not. This is actually deliberate deprivation of capital.
There are a few options to consider in terms of pre-planning but this isn’t one of them. Your situation is generally means-tested for care. In that test they will look at the value of your estate and will take into account any plans used to deliberately reduce the value of your estate to avoid paying care costs.
A commonly missed point is that policies of insurance are not included in your estate. A test case showed that an insurance policy was not to be included in the valuation. I have also personally tested this case with my local authority for a client and it is true. Basically where an individual holds an insurance bond – very common – the value of this will be excluded when assessing an individual’s ability to pay under the means testing.
Consider also that your property is assessed in value for its local market value, not its bricks and mortar value. These two would be very different. Consider that you own a property as tenants in common. As tenants in common, the value you own is not half the value of the property. Its value is your tenancy in a property with another tenant having equal rights to that property. That tenant would be your spouse. If your spouse had died they should have left their tenancy to a trust and you would still have access to the property under that trust.
In an open market value, what’s the value of your tenancy? How much do you think an agent would value your tenancy on the open market? If you think about it, the answer is nil. Who would buy a half interest in a property, especially when you don’t have any control over the other half and who will be living with you?
Be careful when planning so as not to deliberately deprive yourself of capital. Any planning should be completed appropriately because any authority looking at your motivation will see that if you have completed it specifically to mitigate care costs, they will disallow it.
Moreover, planning needs to be completed now rather than when the care situation arises.
I recommend you place capital into trust now that you are going into care. This will take the capital outside the estate for InheritanceTax and long term care…
Expert’s advice: Score 0 out of 10.
Unfortunately not. This is actually deliberate deprivation of capital.
There are a few options to consider in terms of pre-planning but this isn’t one of them. Your situation is generally means-tested for care. In that test they will look at the value of your estate and will take into account any plans used to deliberately reduce the value of your estate to avoid paying care costs.
A commonly missed point is that policies of insurance are not included in your estate. A test case showed that an insurance policy was not to be included in the valuation. I have also personally tested this case with my local authority for a client and it is true. Basically where an individual holds an insurance bond – very common – the value of this will be excluded when assessing an individual’s ability to pay under the means testing.
Consider also that your property is assessed in value for its local market value, not its bricks and mortar value. These two would be very different. Consider that you own a property as tenants in common. As tenants in common, the value you own is not half the value of the property. Its value is your tenancy in a property with another tenant having equal rights to that property. That tenant would be your spouse. If your spouse had died they should have left their tenancy to a trust and you would still have access to the property under that trust.
In an open market value, what’s the value of your tenancy? How much do you think an agent would value your tenancy on the open market? If you think about it, the answer is nil. Who would buy a half interest in a property, especially when you don’t have any control over the other half and who will be living with you?
Be careful when planning so as not to deliberately deprive yourself of capital. Any planning should be completed appropriately because any authority looking at your motivation will see that if you have completed it specifically to mitigate care costs, they will disallow it.
Moreover, planning needs to be completed now rather than when the care situation arises.
Consider a plan that will protect your estate
Financial Advisers Advice
In order to get around Long term care you should consider a plan that will protect your estate in the event of having to go into care.
Expert's Score: 3 out of 10
Long term care is another of those stealthy unhealthy taxes. Policies are available but remember ...
Financial Advisers Advice
In order to get around Long term care you should consider a plan that will protect your estate in the event of having to go into care.
Expert's Score: 3 out of 10
Long term care is another of those stealthy unhealthy taxes. Policies are available but remember that means you are still paying for your care rather than protecting your wealth. Ask an IFA to prepare a quote for you. You’ll find the plan is expensive and with most providers having pulled out of the market there is little cause for competition and that is also reflected in the cost of the premium.
Yes there is the debate as to whether or not we should be paying for care at all. Some may argue we all should pay our way and others will ask what the government do with the money they are given. Whilst the government whisks its way through the greenhouse factor using it as an excuse to collect more taxes, you can't help but feel taxes, whether hidden or obvious, will increase.
On one hand they say the greenhouse issue is important and two weeks later they announce they will purchase £20 billion of trident missiles. C’mon guys, get real. Now we are hearing about taxing plane rides. 1
Have we any evidence that raising taxes on fuel stops people using it as much, because surely that’s the objective. Hardly! I have studied everywhere and can find no evidence of any impact, so the real reason is to collect more taxes to fund little shopping sprees like the above. It's not like they aren’t collecting enough tax. I was in Spain last week with the children paying half what I pay here for petrol – where’s that money going and how are they spending it on making us green?
When will the UK taxpayer say enough is enough – the time may be coming? As for protecting your home, be mindful that any actions you take that are aimed at deliberately depriving yourself of capital will not be allowed. Simply giving away cash to lower your estate doesn’t work. The relevant authorities will monitor the motivation for your actions.
A couple of tips for you to consider however, are often missed. When the authorities value your home for care costs, they have to value it as if it were on the open market.
There are two ways to own your own home. If you hold your property as tenants in common rather than as joint tenants, the value can be reduced. Put simply, what is the value of your tenancy in common on the open market when the purchaser clearly has to live with the other tenant in common. Who would consider buying that? Few people would, and the value is reduced accordingly. This is a simple way to reduce your estate’s value and protect it from unnecessary taxation.
If you have investments, consider also that an investment bond, unlike an Isa etc is classed as a policy of insurance and is excluded from your overall value when calculating if your total holdings are over the limit. If you are considering this option ensure you use a policy that has lives assured, as opposed to another similar option which does not have lives assured, and is called a capital redemption bond. Although they look the same the latter is not excluded from the authority's calculations.
Lastly, I did hear someone say that if you reduce your estate for Inheritance tax, this will mean that your motivation cannot be questioned, and the value of the capital shouldn’t be taken into account for long term care costs. This isn’t strictly true. If it looked like you would need care, or were in care, the authorities would not exclude the gift.
In order to get around Long term care you should consider a plan that will protect your estate in the event of having to go into care.
Expert's Score: 3 out of 10
Long term care is another of those stealthy unhealthy taxes. Policies are available but remember that means you are still paying for your care rather than protecting your wealth. Ask an IFA to prepare a quote for you. You’ll find the plan is expensive and with most providers having pulled out of the market there is little cause for competition and that is also reflected in the cost of the premium.
Yes there is the debate as to whether or not we should be paying for care at all. Some may argue we all should pay our way and others will ask what the government do with the money they are given. Whilst the government whisks its way through the greenhouse factor using it as an excuse to collect more taxes, you can't help but feel taxes, whether hidden or obvious, will increase.
On one hand they say the greenhouse issue is important and two weeks later they announce they will purchase £20 billion of trident missiles. C’mon guys, get real. Now we are hearing about taxing plane rides. 1
Have we any evidence that raising taxes on fuel stops people using it as much, because surely that’s the objective. Hardly! I have studied everywhere and can find no evidence of any impact, so the real reason is to collect more taxes to fund little shopping sprees like the above. It's not like they aren’t collecting enough tax. I was in Spain last week with the children paying half what I pay here for petrol – where’s that money going and how are they spending it on making us green?
When will the UK taxpayer say enough is enough – the time may be coming? As for protecting your home, be mindful that any actions you take that are aimed at deliberately depriving yourself of capital will not be allowed. Simply giving away cash to lower your estate doesn’t work. The relevant authorities will monitor the motivation for your actions.
A couple of tips for you to consider however, are often missed. When the authorities value your home for care costs, they have to value it as if it were on the open market.
There are two ways to own your own home. If you hold your property as tenants in common rather than as joint tenants, the value can be reduced. Put simply, what is the value of your tenancy in common on the open market when the purchaser clearly has to live with the other tenant in common. Who would consider buying that? Few people would, and the value is reduced accordingly. This is a simple way to reduce your estate’s value and protect it from unnecessary taxation.
If you have investments, consider also that an investment bond, unlike an Isa etc is classed as a policy of insurance and is excluded from your overall value when calculating if your total holdings are over the limit. If you are considering this option ensure you use a policy that has lives assured, as opposed to another similar option which does not have lives assured, and is called a capital redemption bond. Although they look the same the latter is not excluded from the authority's calculations.
Lastly, I did hear someone say that if you reduce your estate for Inheritance tax, this will mean that your motivation cannot be questioned, and the value of the capital shouldn’t be taken into account for long term care costs. This isn’t strictly true. If it looked like you would need care, or were in care, the authorities would not exclude the gift.
Source 1. Nuclear weapons source: http://news.bbc.co.uk/1/hi/uk_politics/6205174.stm 04/12/06
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© 2007 Worldwide Financial Planning - this site is intended for UK investors only
By clicking on any of the external links within this website you will leave the regulatory site of Worldwide Financial Planning Ltd. Worldwide Financial Planning Ltd are not responsible for the accuracy of the information contained within the linked sites.'
Registered office; The Old Carriage Works, Moresk Road, Truro, Cornwall, TR1 1DG. Registered in England and Wales No. 3533548. Contact info@wwfp.net or 01872 222 422
© 2007 Worldwide Financial Planning - this site is intended for UK investors only
By clicking on any of the external links within this website you will leave the regulatory site of Worldwide Financial Planning Ltd. Worldwide Financial Planning Ltd are not responsible for the accuracy of the information contained within the linked sites.'