St Martin's House, 63 West Stockwell St. Colchester, CO1 1HE
Tel: 01206 577676, Fax: 01206 548704

The Chestnuts, 4 Stortford Road, Great Dunmow, Essex, CM6 1DA
Tel: 01371 873277, Fax: 01371 859232

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Monday to Friday 9am - 5pm    Saturday 9am - 1pm

Care Home Fees

Couples often ask if there is anything they can do to protect their property from being used to pay for care home fees should one of them have to go into care. Whilst many people assume that they can give away their property in their lifetime, for instance to their children, but still continue to benefit from it, they may not be aware of the consequences that may arise from this.

In such instances the local authority may deem that a person has deliberately deprived themselves of assets in order to avoid care home fees and may claw this back in order to pay for their care. Furthermore when a person dies, for inheritance tax purposes, a person who has given away assets during his lifetime, but continues to enjoy the benefit of them may be deemed to have made a gift with reservation of benefit, and again this may be clawed back into their estate for inheritance tax purposes.

It is possible to protect some of your property so after your death your loved ones are provided for by severing your joint tenancy and the use of a lifetime trust. For more information on this please contact our Wills Trust and Probate Department.

Lifetime Gifting and Inheritance Tax

With the increase in house prices it is ever more likely that a person’s estate may be liable to inheritance tax on their death. Each person has a nil rate band of £325,000 before he is subject to inheritance tax. Anything in excess of that amount will be subject to inheritance tax on their death at 40%, subject to certain exemptions and reliefs. Whilst married couples still enjoy the transferable nil rate band which may double their allowance before tax, individuals who have not married do not enjoy the benefit of the transferable nil rate band. It is possible to make lifetime gifts of money to reduce the size of your estate. If you survive for a period of 7 years after making the gift it will not be called back into your estate for inheritance tax purposes. There is no guarantee in life that any of us will survive the next seven years, but it is possible to make small gifts of money during your lifetime which are immediately exempt from inheritance tax. For more advice on this please contact our Wills Trust and Probate Department.

Debts and Tax liabilities

When a person dies the debts of his estate must be paid before any legacies are paid to the beneficiaries provided for in the Will. It is important when preparing a Will for the testator to understand the extent of his debts and how this will impact on his loved ones after his death. Most clients provide for any debts to be paid from residue, but if the testator has provided for legacies in his Will with residue to his spouse, if there are large debts in his estate or a large tax liability arises on the legacies, his surviving spouse may find she has inadequate capital to live on for her lifetime.

Alternatively an unmarried person may leave his home, which is subject to a mortgage, to his partner or a family member or friend under his Will. The recipient of such gift will be liable for any outstanding mortgage on the property, unless otherwise provided for or again this may be payable from the residue and reduce the residuary beneficiaries’ entitlement. This may not be what the Testator intended and advice should be sought in this regard. For further advice please contact our Wills Trust and Probate Department.