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Post on 28-Mar-2016
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Leaving a nancial legacy to children or a charity is a common wish for many of us. However, the potential burden of care home fees can mean nancial legacies are severely reduced or even eliminated. Whilst the law states that individuals Whilst the law states that individuals must pay for their own residential care (unless their needs are health-related), the situation depends on whether you qualify for local author-ity (LA) funding. LAs assess virtually all income and assets to determine what you pay. Anyone with assets of more than 23,250 must pay all the costs of their care but nothing is payable if the value of your assets is less than 14,250. This means that most
home owners will not qualify for LA funding to meet the cost of their residential care. Many individuals think residential care. Many individuals think that the solution is to give away their homes whilst continuing to live in them. However, if a LA is able to prove that you gave the property away to avoid paying nursing home fees (known as the "deprivation of assets" rule) you will be "deprivation of assets" rule) you will be treated as still owning the property for this purpose unless you can establish at the time of the gift that (1) you were in good health and did not foresee that you would require nursing care in the future and (2) there were valid reasons for gifting the property away. for gifting the property away. Once you have manoeuvred around these potential issues the next question is whether you should make
an outright potential issues the next question is whether you should make an outright gift of the property to someone else (i.e. a child) or put some other arrangement in place. The problems with making a direct gift to say a child is that you could lose your home if the child has lose your home if the child has matrimonial or nancial diculties in matrimonial or nancial diculties in the future. A more sensible approach would be for you to put your home into trust. Under the terms of the trust you would be entitled to occupy the property for the rest of your life. With any trust arrangement it is very important that you choose your important that you choose your trustees carefully since they will own your home. Of course, once you start transferring assets from one place to another the taxman tends to become interested. You should always take specialist advice before entering into any transaction which results in you transferring your home to someone else. The following is a brief overview of The following is a brief overview of the tax issues applicable to putting your home into trust.The transfer is a disposal for Capital Gains Tax purposes.This means that unless you have occupied the property as your main residence, you will be taxed on the dierence between the current the dierence between the current value of the property and the price you paid for it. For inheritance tax (IHT) purposes the transfer into trust is a chargeable transfer which means that an immediate tax charge would
arise if the value of your home exceeds what is known as the nil rate band. The nil rate band is currently set at 325,000 for individuals or 650,000 for married couples/civil partnership. The tax is charged at a at rate of 20% on the value of the property 20% on the value of the property above the nil rate band. If you die within seven years of putting the property into trust a further tax charge can arise. Also, because you have given your home away but continue to occupy it the taxman regards the value of it as still forming regards the value of it as still forming part of your estate for IHT purposes. If this anti-avoidance rule applies to your circumstances then you should take advice before doing anything else as problems can arise. As we are all living longer the downAs we are all living longer the down-side is that an increasing number of us will require residential care at some point in our lives. For those who require residential care, the cost of providing it could mean that the value of their estate is severely diminished. Putting sensible planning in place now could ensure that your future care needs are met and that your intended legacies remain intact. Due to the complexities that surround such planning it is imperative that specialist advice is taken before you specialist advice is taken before you doing anything else. For further advice please contact the WBW Private Client Services Team on 01626 202404.