Information

What happens to my estate if I get taken into care?

You will have been visited by Social Services, who will inform your Local Authority that you can no longer look after yourself. The Local Authority then decide where you will be placed and will be responsible for the payment of your care. So far so good… The next stage however, is the council determining how they will get the costs back from you. If your total capital (including property) is above £23,250 then you will be paying the council until your funds reduce to this amount. Once you reach the £23,520 your payments reduce until you have £14,250 remaining. You are allowed to keep £14,250.

Compare this to Inheritance Tax at 40% above £325,000 and it becomes clear that your ‘Care Costs Tax’ is 100% above £14,000!

Further statistics to consider…The average care home charges £30,000 per year for your care (data taken in 2008 by Age Concern). Approximately 70,000 people were forced to sell their homes in order to pay for care costs in 2007 (The Guardian, 17th November 2007). As many as 2/3rds of 45-65 year olds have made no financial provision to pay for long term care or protect their assets. And finally, most scary of all, it is projected that up to 1 in 2 of us will need to go into care (data from Help the Aged),no doubt as a result of our longer life expectancy.

Is there anything I can do about this?

You can set up a Family Protection Trust and transfer all your property and savings into this. However, we would need to assess your personal situation to ensure this is a viable option for you. Our interests lie in protecting your assets and ensuring as much as possible is left to your beneficiaries rather than the state.

Are there any other options available to me?

Yes - instead of owning a property 'jointly', you could become 'tenants in common', only owning a percentage of the property each. This way you may get to protect some of your property.

There are more options, but these are not as effective and are more risk averse. Your options would be:

Do nothing and leave it to chance that you will not require any form of care before you die.

Distribute your wealth amongst your family now. This option carries considerable risks as it may leave your family liable for large Capital Gains Tax Bills and as a result of your donations they may no longer be entitled to any benefits they currently receive. You may find your early generosity will also spark family fall outs.

Set up an Annuity Plan to cover the Care fees potentially due. This policy will vanish on death and the biggest risk is if you die within a few months of the policy’s inception. It may be possible to insure against this. Speaking to a qualified FSA Financial Advisor should give you a clearer picture of the advantages and disadvantages.

Setting up a Trust in your Will that is set up on first death. Probably the next best solution as it is proven and cost effective. However, only the assets placed in the trust are guaranteed so the survivors share would still be left at risk.

What are the benefits for me if I set up a Family Protection Trust?

You may not have to have to pay Probate Fees on the majority of your assets in the trust that you would otherwise have had to pay for when you die. So, for example, if your estate is worth £250,000, the 3% Probate fee would be £7,500, unarguably a significant saving.

Because your assets are contained in the trust, on your death they can be distributed quickly and easily following the instructions left in your Will. This will save the time taken by the Probate process.

If your beneficiaries choose, they could retain some of your estate in the trust, for example, if a son or daughter may spend the money unwisely (possibilities include; drug or alcohol addiction or a gambling problem).

Finally, your Will may be contested under the 1975 Inheritance (Provisions for Family and Dependants Act), a Trust cannot be contested so you can be secure in the knowledge your estate will be distributed as you wish.

If you don't leave a will, your estate will be subject to the rules of intestacy, which are legal guidelines dictating how your assets will be distributed after your death. The key consequences of not having a will include:

Potential Delays and Disputes

The absence of clear instructions may lead to delays in administering your estate. Moreover, disagreements among family members about asset distribution may arise, potentially resulting in legal disputes which could be a lengthly, costly and stressful process.

Distribution According to Intestacy Laws

Your assets will be distributed based on the legal hierarchy, typically starting with a surviving spouse or civil partner, followed by children, grandchildren, parents, siblings, and so forth. Your spouse may not receive all of your estate. Your children will also have the authority to sell assets (i.e. the family home) in order to access their inheritance.

Guardianship for Minor Children

If you have minor children, a will allows you to appoint guardians of your choice. Without a will, Social Services will determine who will assume the responsibility of caring for your children.

No Special Bequests or Gifts

You won't have the opportunity to make specific bequests or leave gifts to individuals or organisations that are important to you without a will, so your friends and charities will receive nothing.

Potential Higher Inheritance Tax Liability

Intestacy laws do not consider tax planning, and this could result in a higher Inheritance Tax liability for your estate than if you had a carefully drafted will, subsequently HM Revenue and Customs will receive all the tax you could have avoided and your family receive considerably less.

Higher Costs to You

If you neglect to leave clear instructions, your bank and/or solicitor may charge significantly more to navigate the complexities of your estate, potentially resulting in higher fees and complications for your beneficiaries.

To ensure that your assets are distributed according to your wishes and to minimise potential complications for your loved ones, it's advisable to create a clear and legally valid will.

Choosing who should write your will is a crucial decision. The options available to you are:

Doing it yourself

DIY Will packs are readily available from retailers or you can write one yourself. However, you would not receive professional help or advice if doing this and could end up not distributing your assets in the most economical way. Your Will may not be worded correctly and could be contested. If you get it wrong, it will be your beneficiaries who are affected and they can’t ask what you meant after you are gone.

Doing it online

You have your Will written for you by an online provider. They collect your instructions and from this, draft your Will. This approach lacks the personal touch and you may not end up with the detailed Will you required.

Doing it through your Solicitor

Unless your Solicitor is ‘STEP’ qualified, they may not be specialists in Will writing. Law is by definition an extensive and complex subject and many solicitors choose to practice in other areas. The Law Society also no longer insists that Solicitors sit exams in Will writing and it is worth remembering not everyone who works in a Solicitors is a Solicitor.

You will probably also find that your Solicitor does not operate on a ‘fixed fee’ structure, rather an hourly rate, so it could be costly. Alternatively your Solicitor may offer a ‘loss leader’ rate providing you appoint them as your executors, which could end up costing you thousands of pounds. A member of your family or a friend you trust with this responsibility can do this for you.

Doing it through your Bank

Your bank will either send you a form or an official will take your instructions which is then passed on to a processing centre. This option is unlikely to offer any personal advice on how to structure your Will so you may end up with a Will not best suited to your needs. Banks that appoint themselves as your executors could take as much as 5% of your estate in fees after you die.

And finally…Doing it through a professional Will writer

A Will writer will take your instructions, give you advice as required and then draft your Will according to those needs. Most will visit you at home at hours to suit you. The important thing is to ensure your Will writer is properly qualified – ask to see their qualifications. Will writers should have professional indemnity insurance, subscribe to a Code of Practice and be a member of a professional body (which would have an independent complaints procedure, should the need arise).

Things to watch out for: Beware of ‘special offers’. Often these are advertised in the hope that you will purchase ‘additional extras’ which would prove costly. An example would be if they offer to become your executor or offer to assist in the administration of your Estate after you are gone. Many require payment up front – leaving you to wonder what would happen if the company no longer exists after your death?

Costs of making a Will. Do not get caught out with VAT – ask if the quote includes it. Factors to consider include; How complicated your requirements are, how qualified your Will writer is – a fully qualified Will writer is required to undergo ongoing training and will therefore be more expensive than someone who is not qualified. You also need to factor in how much advice you need/get and the explanation of it once your Will is written. Make sure you have a supervisor to ensure your Will is signed and witnessed correctly.

A summary of what to ask your will provider:

- What qualifications have their staff passed in preparing wills?
- How many hours compulsory training per year do their staff complete in preparing wills?
- Do they have professional indemnity insurance?
- Do they provide details of all their fees in advance of the appointment?
- Do they provide advice to tailor your will to your exact circumstances?
- Do they provide advice to minimise inheritance tax and shelter assets from long term care?
- Do they provide a two visit system to ensure the will is signed and witnessed correctly?
- Do they provide an independent system of redress if the client is dissatisfied?
- Are they working to a Code of Practice with independent approval – such as from the OFT?

How do I protect my home?

Problem 1: Most people are Joint Owners of their homes with their partner or spouse. Upon one owners death the property automatically passes over to the survivor. However, this may cause problems in future, for example, if they remarry the property passes to the new spouse which would disinherit any children from the first marriage.

Problem 2: Upon one owners death, the remaining survivor needs to go into a Nursing home – the Local Authority will use the money from your house to pay for the care home fees, again disinheriting any children.

What’s the answer? The answer is to change the way your home is owned. At present you will be Joint Owners. The key is to change this to what is called ‘Tenants in Common’. The process is straightforward and you do not need to inform your mortgage company if payments still remain on the house.

What are the benefits of changing to Tenants in Common?

Each ‘Tenant’ will own one half of the property and each should write a Will detailing what should happen to their half of the property. This can include leaving their share to their own children so in the event of the surviving spouse remarrying, they are not disinherited or by leaving their half to the children, only half of the house value would go towards nursing home costs if the survivor needs to go into care. Recent case law has shown that the value of half a house is effectively Nil (so long as the other half is unwilling to sell), so the Local Authority may not even be able to charge the cost of care against the house.

Is there anything else I can do? We would also recommend that when you write your Will, provisions should be made via a Will trust to delay the gift of half the house to prevent the survivor being forced out of the home by the children (to whom the half was left) and also to ensure the survivor access to the capital if the house is sold. This Will trust is called a Life Interest Trust or Property Protection Trust.

How do I protect my savings?

The same types of trusts can also be used to protect your savings in the same way. They are also called a Life Interest Trust or Flexible Life Interest Trust. Consider setting up trusts to protect specific assets, including your savings. Trusts can provide greater control over how and when assets are distributed, potentially minimising tax liabilities and ensuring a more efficient transfer of wealth.

Independent Financial Advice

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The Institute of Professional Willwriters

The Institute of Professional Willwriters, a not-for-profit self-regulatory body, welcomes members from diverse sectors, including private practice, financial services, solicitors, barristers, and accountants, providing valuable benefits and expertise.

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Details of the IPW Code of Practice

The IPW Code of Practice ensures professional standards, integrity, and trust in will writing services.

- The IPW Code of Practice