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As the onus for paying for care fees moves back from the state to the individual, how can you make sure you’re protecting the legacy you plan to leave?
Whether we agree with it or not, most of us understand the concept of paying for our later life care. Most people are careful and do not want to pay more than necessary, although paying for your own care brings with it the choice of where and how you are cared for. Many people I have met would prefer (and indeed expect) their estate to pass to the next generation and this will not happen if their share has been used to pay for the care of the surviving partner. You may be content with that position, but if you would prefer that your assets provide a legacy for your loved ones (rather than going towards care fees) there are ways to avoid this extra burden on your finances – by arranging your assets and your Will in different ways.
Paying for a partner’s care
Paying for a partner’s care is the default position and naturally occurs as most couples leave their estate to each other on the first death. If this is the case the survivor owns the whole estate which can then be used to pay for care. There are ways to arrange your assets and your Will so that you can avoid this situation.
Revisit your Will
To protect your legacy, first you should examine how you hold your assets. Are they in joint names? Do they pass by survivorship, outside a Will? Should the ownership be changed? You will also need to consider the terms of your Will. If your Will leaves everything to your spouse or partner on the first death, then you will achieve nothing more than the default position – so you could consider a second step.
Protect your property
Including a trust within your Will is one way you can protect your home for your spouse and your descendants. It is possible to set up a trust so that if you were to die, the surviving partner would be given the right to reside in the property for as long as necessary. On the eventual sale of the property the proceeds will be divided between the beneficiaries named in the Will. This way, your share of the property would not be available to pay for your partner’s care. This isn’t the only type of trust your advisor would consider when discussing your needs. It’s just one example which addresses the concerns of many of our clients when they talk to us about what they want to happen to their home.
Further protect your legacy
You may decide to include a trust within your Will regarding your cash assets. Depending on the type of trust, this will give your partner right to receive income from your estate – and then only income could be used towards your partner’s care. The underlying investments would not be owned by your partner and could not be used towards their care fees.
Getting help from a specialist
Deciding how you want your legacy to be distributed, arranging your financial affairs to minimise your outgoings in respect of tax, care fees and other matters are all basic rights and can be done without falling foul of the law. Many people choose not to do this alone and take advice from Independent Financial Advisers, Lawyers and Estate Planning Professionals on how to legitimately minimise their care fees.
Your adviser can introduce you to a specialist who will work closely with you to ensure your Will is set up as you want it and it ties in with your financial planning arrangements. So, no matter how complicated your Will may be, you can be confident that your wishes will be carried out – including any provisions you’ve made to minimise tax liabilities after your death.
Important: Please be aware that the local authority responsible for providing your care will conduct a financial assessment in relation to meeting needs for care and support. If the local authority determines you have deliberately removed your assets to avoid contributing to care costs, it has powers to treat you as if you still possess the assets.
The above is not intended as a substitute for legal advice tailored to your individual circumstances. If you’d like to know more and how our partnership can help you, get in touch with your adviser.
The Financial Conduct Authority does not regulate taxation & trust advice and will writing. Levels and bases of and reliefs from taxation are subject to change and their value depends on the individual circumstances of the investor.
