There are 5 common threats to an estate that everyone should be aware of; marriage after divorce, marriage after death, Inheritance Tax, care costs and bankruptcy. Applefalls utilizes Wills and Trusts to safeguard against these threats.
This could be your divorce or the divorce of one of your children. Let’s say you leave your daughter £50,000 in your Will. She is married at the time and her and her husband use the inheritance to upgrade to a bigger house. A year down the line and he decides to divorce her so they sell the house. What happens to your £50,000? He gets half. While you may get on with your son in law I’m sure you don’t want to leave him £25,000 to go off and spend with his future family. A basic Will in which you leave assets absolutely to your daughter will not safe guard her inheritance against this threat but the use of a trust can.
Marriage after Death
Most people leave their estate to their spouse and understandably the surviving spouse may remarry. There’s nothing wrong with this but what happens to your own children’s inheritance if your spouse re-marries to a partner who already has children? The money you expected to go to your children on your spouse’s death could very well be significantly reduced. Estate planning can ensure your assets are placed in trust for your spouse and children meaning that your children receive their intended inheritance and your assets are not passed down to someone else’s children.
If your assets are worth less than £14,250 at the time you are admitted to care the local authority will pay for all your care. However if your assets are worth more than £23,250 then you will be required to pay for your own care even if this involves selling all of your assets including your family home. Between these two amounts part will be paid by the local authorities and part of the cost must be met by you. With the average person being admitted to care for 4 years and the average care home costing £800/week it doesn’t take long for your entire life savings and assets to be wiped out.
It’s easy to avoid this situation – all you need to do is get your assets below £14,250. Most couples own their house ‘jointly’ – by simply severing the tenancy on your home so that each of you own half then if one of you needs care your house cannot be assessed for care fees. This is because you can’t really sell ‘half’ a house and so the effective value of your house as an asset would be nil.
For a single person it’s much the same method except instead of severing the tenancy you would convey half of the property into a trust. This sounds complicated but it’s an easy process and the outcome’s the same – you own half the house, the trust (controlled by you) owns the other half and the value of your home is effectively nil and cannot be assessed for care fees