Hold onto your wealth for future care needs or start Inheritance Tax planning?

More people in retirement appear to be more reluctant to carry out inheritance tax planning because they fear that they will run out of money to fund their future care needs.

In a recent survey* a third of the people interviewed, who were aged 65 and above, said they had been put off Inheritance Tax planning because they felt their savings would be needed for care home fees. This fear meant that they were dismissing the idea of passing wealth down to the next generation by making appropriate plans.

Whilst this concern is understandable, for some people the amount of wealth they have accumulated will still significantly outweigh the money they may need to fund care; in reality the average amount of time spent in a care home is around five years, often less. Alternatively, if they are able, some will choose to pay for assistance which enables them to stay in their own property. Therefore failing to have an Inheritance Tax strategy in place may well leave such people unnecessarily exposed to inheritance tax, which currently stands at 40%.

Worrying that there is not enough money to keep you in a comfortable lifestyle as you approach your later years is a genuine concern, but one which should be balanced against the facts.

A good financial planner will work with you to give you a full appraisal of your wealth. This means reviewing your current income sources, ensuring your money is appropriately saved or invested and giving you projections as to how long your money is likely to last. They will also be able to talk through the many possible future scenarios, such as factoring in the ‘what ifs’ of needing to pay for care home fees or home help, which will give you a good grasp of your wealth in real terms.

Inheritance Tax planning is a complex area, and there are many avenues to explore. Charged at 40 per cent, Inheritance Tax is applied to any amount of your estate that exceeds £325,000 (2014/15), ‘the nil rate band’. Any unused ‘nil rate band’ from a late spouse or civil partner can be transferred to the surviving spouse or partner, effectively increasing their allowance to £650,000 depending upon the circumstances.

Careful Inheritance Tax planning can help to ensure less of your money is lost to tax, and more stays within your family.

The above article is for information purposes and should not be treated as advice. Individual circumstances should always be considered prior to purchasing any financial products. For further information contact Sanlam Private Wealth by e-mailing letstalk@sanlam.co.uk. Sanlam Private Wealth is a trading name of Sanlam Private Wealth UK Limited. Authorised and regulated by the Financial Conduct Authority.

To find out more about Inheritance Tax planning as well as discussing how to protect your wealth for future care needs e-mail letstalk@sanlam.co.uk. Sanlam has a number of specialist financial planners who hold the specific qualifications required to be able to provide financial advice to individuals and their families about funding long term care needs.

Should you need assistance in arranging this provision for yourself or a loved one then please get in touch; our advisers work alongside your legal and care representatives to put new arrangements in place.

* http://bit.ly/1jw9gDi