Besides the threats to personal wealth posed by family relationships and ageing, there are other significant threats posed by the statutory requirements of the Law and Tax rules.
By being aware of them you can start the process of estate planning and mitigating the potential cost of them – for example reducing the impact of Inheritance Tax and Care Home Fees.
Inheritance Tax (IHT)
Has to be paid on all assets at the time of death (your estate) above a certain level set by the Government. Up to that level is known as the Nil Rate Band (NRB) and you are not taxed on it, above it you are taxed at 40% on all you own – your home, possessions, savings and investments both in the United Kingdom and overseas. All your worldwide assets are subject to UK Inheritance Tax.
The good news is that, if you plan ahead, use your annual allowances and personal reliefs and have an appropriate Will and trusts, you can significantly reduce your inheritance tax liability and exposure to other third-party threats. This does not mean losing control nor necessarily giving assets away during your life, although sometimes that’s a useful way of reducing exposure to tax.
We will advise you about the options available and help you find the right solution to achieve what you want for those you leave behind.
Care Home Fees
Most people hope that their property will pass on to their children and grandchildren eventually. But this will not happen for many, unless careful arrangements have been made to protect the whole value being taken towards the end of their life to pay for care home fees.
The solution to help protect your estate is a Will incorporating a Property Protection Trust (PPT). A testamentary PPT can only be executed whilst both partners remain alive. Upon death of the first partner, their Will specifies that their share of the property is placed into trust and names the ultimate beneficiary of this share, normally the children and grandchildren of the deceased. The surviving partner, under the terms of the Trust, has the unequivocal right to remain living in the property for the rest of their life. On the death of the second partner the Trust comes to an end and the property passes to the beneficiaries.
As the surviving partner does not own the deceased’s share of the property it is fully protected for the beneficiaries, so if the surviving partner requires care, or even remarries, this share of the children’s inheritance is protected. This last point can be of particular interest to couples who have come together but have children from different partners. A PPT can help each person in a relationship ensure that their children inherit their share of the property, while giving their surviving partner the ability to live in the property for the rest of their life. If the surviving partner wants to move to another property, they can still sell the property and the proceeds be used to purchase a new property; the terms of the trust remain over the new property.
We assess your current circumstances and arrange the trust that will provide the best protection for you, your family and your assets.