Another potential threat to your estate is local authority care home fees.
According to statistics, women have a 1 in 4 chance of needing long term
care and men a 1 in 6 chance. You will be means-tested by the authorities
and if you have assets worth between £14,250 and £23,250, you have to pay
a contribution to social care costs. If you have assets over £23,250, you must
pay all care costs. This will amount to £30,000 - £50,000 per year. Should
the last surviving spouse need to go into care, the authorities can even put
a charge against your home.
LESSENING TAX LIABILITY
The second goal is avoiding, wherever possible paying 40% death duty on
the estate. Inheritance tax seems terribly unfair, especially when you`ve
paid tax throughout your life; income tax, national insurance contributions,
capital gains, VAT. It does however have one great plus, it is avoidable with
proper planning. There are many ways in which you can do this; all involve
either lessening the value of the estate or distancing yourself from assets.
Often people now refer to inheritance tax as a voluntary tax because there
are steps that can be taken to mitigate inheritance tax.
Trusts are an important tool. They are used to protect assets and property
from possession by creditors prior to inheritance. This includes protection
from divorce settlements, debts and the trust will not be included during
means testing for care home fees. The current owner establishes a trust
with 2 benefactors; themselves and the inheritor. Upon death, the ownership
transfers to the inheritor. In the case of a protective property trust, it is
agreed with the trustee that the current owner will continue to inhabit the
property until they die.
Married couples must register as tenants in common so each spouse`s share
in the property is treated separately. When the rst spouse dies, the second
does not inherit as their interest goes directly into the trust. It is written
into the deed that the surviving spouse has the right to live in the property
for life or will receive proceeds of any rent. If they decide to sell, they can
do as they wish with `their share` but the other half is safely in trust for the
A family protection trust means half share is left directly to the children
subject to the surviving spouse`s right of occupation. When the surviving
spouse leaves the house, with their consent, it can be sold and the
half share of the deceased spouse goes to the children.
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