Dementia Tax, what can be done about it?

Those with close family members faced with the prospect of requiring domiciliary or residential care, by now, should be well aware of the changes that will affect social care policy. The proposed manifesto will see our vulnerable having to pay for their own care fees if the combined total of their savings and property exceeds £100,000. Granted this raises care fee assessments from £23,250 but, with all things considered is this truly a saving when most assets are tied up in properties anyway? With the housing market as it is today, most people who own their own property will be tasked with paying for their own care fees should the need for care arise. Of course payment can be deferred until death, in which case the deceased’s estate would incur the burden of payment, meaning that leaving a healthy inheritance for the family may soon become a thing of the past. 

Article by Kagowa Kuruneri

Where domiciliary care was not an issue, its successor ensures that certain degenerative and debilitating diseases will attract care fee obligations and others will not, regardless of where care is provided. Does the discrimination between illnesses, geography and means serve any real benefit when the aim is to make care policies fairer?

The worry now is that in order to protect one’s assets or estate, those in need will shy away from much needed assistance until their circumstances are so dire that they require nursing care under the NHS. The other solution would appear to be transferring ownership of assets before care applications are submitted. However, setting aside the fact that it is unclear how such transfers will be treated under the new policy, there are Inheritance Tax provisions that could adversely affect your estate if certain conditions are not satisfied.

At best it is not yet clear whether there will be a way to receive care assistance without losing your property, diminishing the value of your estate, or putting your own health at more risk. However, if you would like to explore the options that are available which would reduce the blow delivered by the “Dementia tax” reach out to Garden House Solicitors today via email or LinkedIn.

www.gardenhousesolicitors.co.uk

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Tel: 01992 422 128

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Email: info@gardenhousesolicitors.co.uk
The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.

Inheritance Tax: the basics

When you pass away, your estate may be required to pay Inheritance Tax. This is a tax on the money, possessions and other property you own when you die and also other assets including certain gifts made during your lifetime.

Everyone has an allowance that they can leave tax free. This is known as the ‘Nil Rate Band’ which is currently fixed at three hundred and twenty five thousand pounds (£325, 000).

Generally speaking, if your net estate is worth less than £325,000 at the time of your death, usually no tax will be payable. If your net estate is worth more than £325,000 at the time of your death then normally tax is paid on the surplus at the rate of 40%.

This is subject to various exemptions and reliefs. For example if you have a spouse or civil partner, inheritance tax would not be paid on anything they inherit from your estate. Your spouse or civil partner could then use the percentage of any remaining allowance from your estate that may not have been used when they pass away. In simple terms, this generally means that if you are a married couple or in a civil partnership with a combined estate worth less than £650,000 and you leave everything to each other on the first death, Inheritance Tax will not be an issue.

Remember a charity in your will week, 7 – 13 September 2015

Chris and I were very pleased to support this year’s ‘Remember a charity in your will week’. The week aimed to increase awareness of the importance of charitable legacies, and encouraged more people to think about including a good cause in their Will.

Many of our clients like to include a gift to charity once they have looked after their loved ones. For some it is a chance to give back, perhaps to a medical charity who have supported them through their final years. For others, it is remembering a charity who helped look after a close relative during a difficult time, or simply a charity they believe to be a particularly good cause.

Inheritance Tax: Additional tax free allowance for homeowners from April 2017

It was announced in the Summer Budget last month that an additional nil-rate band will be available from April 2017.

The extra allowance will be exclusively available to estates where the deceased dies on or after 6 April 2017 and their residence is passed to one or more direct descendants. In other words, if your children, stepchildren or grandchildren inherit your home on your death, your estate will benefit from the additional allowance.

The additional allowance will be £100,000 in 2017/2018 and this amount will increase by £25,000 each tax year until 2020/21 when the additional allowance will be £175,000.

The current position is that when you pass away, the net value of your estate is calculated and everything over the value of the nil-rate band (currently £325,000) is taxed at the rate of 40%. This is subject to various exemptions and reliefs, for example anything left to a spouse or civil partner will pass tax free.