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Care Fees and IHT Planning

Care Fees and  IHT Planning

How can I invest my capital to pay for care and reduce my Inheritance Tax liability?

Client Circumstances

  • Mrs Todd is a 78 year old widow
  • Lives in sheltered accommodation
  • Requires some help from caring agency
  • Has sufficient income to cover expenditure at present, but will require further income if she needs more care
  • Has £350,000 in savings, plus property of £230,000
  • Does not wish to lose access to or gift any capital
  • If Mrs Todd does nothing, her Inheritance Tax bill will be £102,000
  • Has not set up a Power of Attorney

Recommended Solutions

  • Mrs Todd to invest £255,000 into a specific Inheritance Tax Plan (See IHT 5)
  • Remainder of capital kept on deposit for emergency funds
  • To set up Lasting Power of Attorney (LPA)
  • Make sure Will is up to date

Benefits from advice given

  • Mrs Todd is able to remain in her Sheltered Accommodation
  • After holding the investment for two years, Mrs Todd’s Investment is removed from her taxable estate
  • The plan aims to achieve a net return of 3% per annum which can be taken as income or left invested
  • Mrs Todd will have capital of £95,000 for emergency funds to pay for day to day living and top up care costs
  • Should Mrs Todd require to withdraw capital from the investment she can do so
  • Total IHT saving after 2 years of £102,000
  • Mrs Todd has ensured a person of her choice can look after her personal affairs if she is later unable to

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Future Servicing

We will look to carry out a regular review of your circumstances, objectives, needs and portfolio performance to ensure all arrangements continue to be suitable and advise of any changes that may be appropriate.

This example is for illustrative purposes only, based on current legislation and tax allowances. Tax rules and regulations are subject to change.

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