Mr and Mrs Ford were a married couple with two children, their estate was simple they had their family home, some savings, and investments. The estate was not large enough to attract inheritance tax as they were able to qualify for the new Residence Nil Rate Band meaning they had a tax allowance as a couple of £1,000,000 before the estate would be subject to any inheritance tax.
Their main concern was to control the impact any care need would have on their estate, and to make sure the children were protected should they suffer a divorce or financial issues in later life.
At Richardson Tribe we created our Family Protection package to help all clients in this position. They want strong flexible planning in place to protect the family should something go wrong, but also to keep ownership and flexibility.
Our Family protection package is the position we want to see all of our clients in as a minimum, it offers protection and flexibility to family’s and comprises three key elements:
Avoid unnecessary care costs
Keep it in the family with bloodline protective Wills
A lot of people are still unaware that if they need social care in later life everything they own will be subject to a means test by the local authority. It has been this way since the 1990 community Care act.
If you need social care in later life the local authority will use your assets to pay for this care until you reach the lower limit which in England is currently set at £14,250.
There are many myths about how people can protect their assets from these assessments, a common one is for a parent to sign their house over to the children, so it will escape the means test. This just doesn’t work, the local authority will go back over any period of time to see if you have deliberately deprived yourself of an asset.
Our Family protection package uses a property protection trust to leave your half of the house to your children but stops them from inheriting it until you have both passed away. This way if your spouse needs care in later life or remarries after you die, then your half of the estate is safe for your children.
This type of planning doesn’t change anything in your lifetimes, both you and your spouse are still the owners of the estate.
Mirror wills are used by many clients, these simply leave everything to each other, then down to the children on the second death of the couple. With modern life, these types of wills leave a lot to chance.
If you were to pass away and leave everything to your spouse, then later in life they go into care or remarry, either the new spouse or local authority are likely to inherit most from your estate.
This is because a remarriage will invalidate a previously made will and make the new spouse the next of kin.
The same is true in regards to the grandchildren. The clients assume that everything will make its way down to them, but if one of your children dies first in their relationship, then their estate will likely go to your son or daughter-in-law. If they were to remarry, the chance of the grandchildren not inheriting is greatly increased.
The trust used in our Family protection package will ensure that you have bloodline protection, and allows controls to be kept with the children and the grandchildren after you die.
Lasting Powers of attorney are a relatively new piece of Estate planning, they were introduced in 2007. They come in two forms, the lasting power of attorney for property and financial affairs, and the lasting power of attorney for health and welfare.
These documents are registered with the courts, and can be given to the attorneys so that they in turn can deal with banks, financial institutions, medical professionals, and the local authorities. These documents allow the attorneys (normally the children) the ability to make the most important decisions at your most vulnerable time, such as are you to go into care or have care come to you?
The attorneys must act in your best interests at all times, and you can have multiple attorneys and decide if they are to act jointly or jointly and severally.
By setting up your Lasting powers of Attorney you remove the burden from the children, should ill health arrive in later life. To complete a Lasting power of Attorney this must be done whilst you are in good mental health and have capacity.
If someone becomes ill such as having a stroke or dementia and capacity is affected then this option can be lost to the family and they will be forced to have the local authority take control of the estate and situation until a deputyship order can be taken from the court which can take some time and a great deal of cost.
Our Family protection package puts our clients and their families in a very strong position should anything happen in later life.