There are few things that get people worked up as much as the idea of their property being used to fund later life care or all of it being swallowed up by inheritance tax leaving their families with nothing...

…It is therefore no surprise that I am regularly approached by people looking for a solution to stop either of these things from happening.

Working alongside (literally alongside we are all together in one building) my sister company Nsure Financial Services means that I can ensure my clients receive advice tailored to their individual needs and between us we alleviate most of our clients worries, but not always how you would expect.

We don’t tell people that the best thing to do is to put their house into a trust to avoid care home fees or an IHT bill, as we know that this rarely works. For most people by trying to hide your property from the tax man or in the case of care fees, the local authority you are essentially committing benefit fraud as you would have to hide the existence of these trusts at the point of assessment. Simply writing down another reason for having created the trust won’t wash. The Local Authority have heard it all before and will treat you as guilty until proven innocent despite what firms setting up such trusts might tell you and we all know the tax man takes no prisoners!

We also don’t advise signing over your home to your children with you continuing to live in the property as rather than avoiding an inheritance tax bill it often creates one, with the only way around this being you paying your children as the new owners the full market rent. If you don’t, this then becomes a gift with reservation and it is also considered as deliberate deprivation and your children may find that capital gains tax kicks in at a level that it probably wouldn’t have been if the property hadn’t been signed over.

So, if we don’t do any of those things (and I’m pretty sure most if you will have heard of someone trying some of the above) what do we do?

For home owning couples, we may advise you to sever the tenancy on your property changing the ownership from joint tenants to tenants in common. We can then create a life interest trust within your Will leaving your half of the property to a person/s other than your partner- often your children. What this means is that if on second death the remaining partner requires long term care that only half of the value of the property can be assessed for care fees. It is also means that the remaining partner can stay living in the property, sell it and downsize should they wish with their needs always taking precedence until they permanently leave the property or otherwise stipulated within your Will. A life interest also protects your children’s inheritance from being wholly swallowed up by second marriage hence it sometimes being referred to as a blood line Will.

One of the other crucial things we do is to get a clear overview from you as to your current financial situation and if it looks as though there will be inheritance tax to pay, a financial services advisor may give you proper guidance on how to minimise this. They can talk you through the different ways you can properly fund later life care should you ever need it.

To talk about the options that are legitimately available to you or to discuss any concerns that you may have about your existing Will or and trusts you may have in place please contact me on 01903 821010 or emma.wells@nsure.co.uk.