Protect Your Cash and Investments
How to prevent up to £500k in cash and investments being used to fund the care of your spouse or partner in later life
The amount that anyone can leave inheritance tax free is £325k – this is called the Nil Rate Band allowance.
The amount that a property owner can leave inheritance tax free if they are leaving their share of their property to a spouse (not an unmarried partner), child or grandchild rises by £175k to £500k and this is called the Residential Nil Rate Band allowance.
There is no inheritance tax between spouses.
However, if you leave cash and investments to a spouse OR an unmarried partner within your Will and they then go into care after inheriting it absolutely, that money could be used to fund their care in the future even if you have prevented your property being used by using one of our specialist Trusts to avoid this.
What you need to do to protect your cash and savings from being used up by a spouse or partner’s care fees after your death is put in place one or both of the following:
A Nil Rate Band Trust within each of your Wills which will mean you can leave up to £325k to your spouse or partner and it will not be able to be used to fund their future care, that care would have to be paid for from any pension payments the survivor received and any cash or investments that they had unprotected in their own name with any shortfall being picked up by the Local Authority.
If a property is involved that is your main residence and you are leaving your share of that property to your spouse (you must be married for this Trust to work) then a Residential Nil Rate Band Trust, will enable you to leave up to £500k to them in the secure knowledge that if that spouse were to go into care the money left within the Trust could not be used to fund the care.
Should the surviving spouse then remarry after the death of the first party, these Trusts will also prevent these funds being lost to the new spouse or their family should the survivor subsequently divorce or die without updating their Will.
Of course, the use of these Trusts does not mean that the funds CANNOT be used if the family wish, what it DOES mean is that the maximum grant available from the Local Authority will be able to be gained because the funds in the Trust will not be able to be taken into account when assessing the level of funding grant to be allocated, however, once the funding has been agreed, the funds in the TRUST could then be added to the funding grant to get the survivor a better level of care than that which just the basic funding on its own would have provided.
In case the survivor is unable to speak for themselves or has lost mental capacity it is STRONGLY recommended that Powers of Attorney are put in place to guarantee the wishes of the survivor are upheld and someone trusted will have the power to speak to the Local Authority for example on the survivor’s behalf - see here for further information on Powers of Attorney https://www.thywill.co.uk/lastingpowerofattorney
As alluded to earlier if you have a property this should be protected also with one of our specialist property Trusts.
See here: https://www.thywill.co.uk/will-based-trusts
And
Related Articles