Death and taxes, they say are the two certainties in life so why do we forget about looking at what care we may need in the future. Surely it is just as important to think about the care we want as we get older as making a will to ensure what happens to our assets on death?
Advice in relation to wills has traditionally focused on taxes but more and more people are now worrying about future care needs exhausting their hard earned savings and taking potential inheritance from children. Yes, many people think it is important to leave money for your children but here at Argo we think it is more important you are looked after first.
Some people do not worry about spending their savings on any future care some do. For those that do it is worth noting that, at the moment, care charges are effectively a tax of 100% on your assets in excess of £23,250. As with all things there are reliefs and exemptions that affect this figure but ultimately because of the way in which care charges are calculated you could be left with £14,250 to leave to your family members.
Now it is worth remembering that most people do not require care as they age and it is only the most complex needs that require a permanent placement in a care home but as we have said before you insure your house and car for the "what it" so why not plan for the worst case scenario. This is the situation when you need care and your partner remains at home but unexpectedly dies before you. If you have been that loving, caring couple their estate will pass to you but all of it then becomes chargeable to care fees whilst you are in the care home. You can protect against this circumstance by using a trust.
Trusts can be technically complex so let's look at it is easy terms. Think about a trust as a box of chocolates. Your chocolate tin is the trust. It is a hard, protective casing which looks after the chocolates inside the tin. The chocolates are your different assets. The different flavours represent different assets. We always talk about a tin of roses! Your strawberry cream represents your premium bonds, the coffee cream represents the shares, the caramel hazelnut represents your home. Your chocolates are all mixed in the chocolate tin. You secure the tin by closing the lid and then hand the chocolate tin to someone you trust to look after. This person you trust is called a trustee, the individual you empower to look after the trust. You do not however give them free reign to do what they wish with the trust because you prepare a rule book which tells them when the trust can be opened, by taking off the lid, who can benefit from the assets in the trust, the chocolates and when. It is because the trustee looks after the tin and has to choose to follow the rules you impose, that the funds in the trust are protected from being included in means testing for future care fees.
So, shall we start to look at the things you need to think about putting in a care planning will?
Executors: you need to think about the people you trust enough to manage the responsibility of your estate following your death. Are they over eighteen? Can they deal with money management? Will they disagree with your other executors? Could there be a conflict of interest? An executor has to identify the assets and liabilities in the estate, calculate the total estate and work out whether it is subject to Inheritance Tax. They need to complete Inheritance Tax paperwork and swear statements for the Probate Registry. Once all this has been done they then need to close the assets, pay the bills and distribute the estate. Remember, your executors may be the people you choose to act as trustees of your trust so pick wisely!
Funeral wishes: a will is an ideal place to record your funeral wishes. You can go as far as you like with instructions or you can keep it brief. You would be surprised at some of the things that people want to do!
Gifts: Do you want to make any monetary gifts or gifts of specific items. These are often made to charities, close family and important friends.
Residue: This is what is left once everything has been paid and any gifts have been made. This is the pot you get to divide between those who are important. How old do you want your beneficiaries to be before they receive money? Remember, when planning what you want to do have you thought about the consequences of what would happen if your first choice of beneficiaries died before you? Would you want their children to inherit from your estate or would you want someone else to benefit? Are you leaving your whole estate on trust or just some of it? Is your surviving spouse going to be the main beneficiary? Do you have rules that you want to impose on your trustees?
When you look at making a will your wishes are of the utmost importance. However, you do also need to consider the impact of Inheritance Tax on your wishes as these can significantly alter what you have left to give.
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