Generally any planning intended to assist in retaining wealth centres on inheritance tax planning. This often involves some very complicated schemes many of which have been challenged by the Inland Revenue.
Although this does achieve substantial savings for the very wealthy for most clients the reduction in tax payable is of less importance than the objective of providing, holding and devolving amongst the family the resources available.
Among the factors which need to be considered are the following:
a) Financial provision for self and family
b) Providing for retirement.
c) Implications of long term care.
d) Devolution of family resources.
As we get used to planning for longer retirement, partly due to an increase in life expectancy, estate planning becomes much more complex than just avoiding inheritance tax. Planning for residential and home-based care becomes equally, if not more important.
The way in which this overall planning takes place raises a number of practical and ethical questions. It is clearly not right to transfer assets primarily to avoid them being available to pay care fees. This does not mean, however, that the effect that any planning would have on the payment of such fees should be ignored. Indeed it would be foolish to do so, and as professional advisers we would be deemed negligent if we did not consider all the aspects when giving advice to our clients.
The assets owned in each person’s circumstances vary but the way in which the wealth is invested does dramatically affect any contribution to care fees. It may therefore be sensible to look at what assets are owned at an early stage so that there can be no accusation that any changes were to avoid a charge for accommodation. There may, of course, be other reasons for disposing of a particular capital asset and if as a consequence of that action there is a lowering of the amount payable for residential care then that is quite acceptable.
Clients need to provide for old age and alongside traditional inheritance planning clients need to plan for a possible need for home based or residential care. This will involve looking at the assets held, undertaking a full financial review and ensuring the correct will is in place.
This is an extremely complicated area and one which many clients would rather not think about. A decision many will regret at a later stage as they see their assets rapidly diminish.
We would be happy to discuss the general principles of estate planning in all its forms with you. We have connections with experts in each of the individual areas that we can involve should that be necessary.
If you would like to arrange a no obligation meeting to discuss your affairs please contact us via the contact section of this site. It may be a decision that will benefit you greatly in later life.
Clive Jones – Clifford Towers, Chartered Accountants.
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