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Latest News

Residence Nil Rate Band (RNRB).

A new tax-free allowance was announced in the Summer Budget 2015 (the Residence Nil Rate Band) that will take effect on or after 6th April 2017.  Downsizing provisions have yet to be finalised.

There are a lot of myths and misconceptions surrounding this new allowance - please call or view our website pages (not yet updated) for further information - including:

  • everyone has a new allowance of £1M;
  • everyone can pass their home free of tax to their children

You may not get the full allowance (or double the allowance) if:

  1. your estate exceeds £2M
  2. you rent property
  3. you don't leave your property (or proceeds of sale) to the right qualifying people and in the right manner
  4. you are unmarried

WATCH THIS SPACE!

Long Term Care and Estate Planning

Solutions to mitigating the costs of Long Term Care

Many people in UK worry about the 40% of their assets the taxman will take from their estates when they die in the form of inheritance tax, but very few realise that your local authority might take 100% of your assets should you need long term care.

In our increasingly ageing population, it is difficult to avoid the notion that many of us (common statistics say one in four of us) will end up requiring care in our later years.  In the Laing & Buisson, Care of Elderly People Report 2010 the Average annual care home fee with nursing care in London is £42,016 and in the Southern Home Counties and £40,924.

As a guide to funding in England (Scotland, Wales and Northern Ireland apply different rates) when an individual requires care they fall into one of three categories and are treated accordingly:

  1. Those needing care that are single and currently have assets of over £23,250 have to pay for their own care, be it at home or in a residential or nursing home.
  2. Those single people needing care who have assets between £14,250 and £23,250 will undergo an assessment of needs by the local authority.  The care fees will usually be paid by the local authority, but in turn, the local authority will take any state pension payments the person normally receives to help to pay for the costs.  The individual is left with an allowance which is currently £22.60 per week.  For every £250 worth of savings over the lower limit of £14,250 this allowance is reduced by £1 per week.
  3. Those with assets below £14,250 will again be assessed by the local authority but will usually have their cost met in full but in turn, any state pension payments will be taken leaving the individual with an allowance of currently £22.60 per week.

 

If you own a property you are likely to fall into the first category so in the event of you needing Long Term Care, once any cash savings you might have are used up, your property may be sold to pay for the ongoing cost of your care until all but £14,250 has been used.

Under the Community Care Act 1990, the local council have the right, by law, to force the sale of your home to pay for these costs or to take a charge against your property to be repaid on the eventual sale of your home.  It is estimated that 70,000 homes are sold each year to pay Long Term Care cost.  Note that the home is excluded from assessment if:

  1. A spouse or partner still lives there
  2. A relative over 60 still lives there
  3. An incapacitated relative still lives in it
  4. A child under 16 still lives there and the person needing care is responsible for maintaining them.

So how can you protect your home (and other assets) from being sold to pay for any Long Term Care Costs?

Firstly, there are some things you should not do.  Some people believe that simply transferring ownership of their home or other assets to their children will avoid Long Term Care costs.  Unfortunately this isn’t true!  It is not advisable to deliberately deprive yourself of an asset if your prime motivation is to avoid Long Term Care costs.

Cornerstone Wills has several solutions to mitigating the costs of Long Term Care and which solution works best for you will depend on factors such as:

  • Your age, marital status, health, lifestyle and plans for the future;
  • The value of your home and whether it is mortgaged;
  • What other funds are available and any income generated;
  • How much of your estate your also wish to protect for future generations.

One or more of the following options might be best for your requirements.  Click on the link for more information:

It is worth noting that whatever solution is chosen, in order for the arrangements to have the best chance of being successful it is vital that the arrangements are made as early as possible so as to avoid the “deliberate deprivation” rules mentioned above.