Some useful guidance on Asset Protection
With the change in the law in October 2007 most of us have got used to the idea that a complex will for tax planning is less important. For a husband and wife if your joint assets do not exceed £650,000 (2016 rates) then you will probably not be liable for inheritance tax by the time the second one of you dies.
However, lurking in the background is the prospect of paying for nursing home fees instead. Currently running at over £50,000 a year it is easy to see how this could outstrip inheritance tax as a problem when you want to protect assets for the next generation. Despite the recent announcements about an increase in funded social care for those with moderate means we cannot be certain that this will be brought in by the government.
Is there anything you can do?
‘Yes’ is the answer and it involves revisiting your will and using the trust we used to advise as the best for tax planning. This will ensure that at least part of your joint assets is protected from assessment should one of you die and the other go in to a home. If you are on your own there may also be something you can do, which even if it fails will not leave you any worse off if you do go into a home.
However there are advantages to a complete rethink of how you hold your assets while you are alive. If you have paid off the mortgage it is possible for you to change the way you own your home and put it into a trust now. This can speed up the administration of your estate in the long term because the trustees will be able to sell the house without a grant of probate. It will also enable you to define who is going to inherit the house without the risk of it being changed by the survivor changing his or her will after you are gone and redirecting the assets.
A further advantage might be that placing your property into a trust now means that it is not vulnerable to assessment for nursing home expenses should one or both of you go into a nursing home. Since the trust will contain provisions only allowing residence or the income from investments if the property is sold, the capital represented by the house should be protected for your ultimate beneficiaries.
Nothing is guaranteed of course and a lot would depend on how aggressively the local authority was prepared to be but as above even if it fails you and your family are no worse off than you would be if you did nothing. The Law Society is currently recommending that everyone reconsiders their will if they have not thought about asset protection from nursing home fees and Edwards Duthie Shamash actively support this.