Estate Planning Guide

Health issues in later life With people living longer there is also the prospect that they may need more care in later life and they may need to contribute to the associated costs. Mrs J is 40 and married with three teenage children. Both her parents suffered from dementia in later life. To speed up the care process and to enhance the care provided, Mrs J and her husband spent considerable sums of their own money on her parents’ care at home. When her parents died they had no life cover in place and very few assets. Mrs J paid for the funeral costs. 6 Whole of Life Cover Remarriage, children and step children Mr and Mrs U are both in their seventies and have been married for 15 years. They both have adult children from previous marriages and would like their respective children to inherit their individual estates. Mr U has a much higher income than his wife who has little pension provision and he is very concerned about the income she would receive if he were to die first. 7 Life Interest Trust BR Benefits Mr U could also reduce the timeline by investing in BR qualifying assets during his lifetime and directing the investment to the IPDI trust in his Will. If his death occurred within two years Mrs U would then only have to survive for the balance of that period to ensure the capital achieved IHT exemption. The value of assets held in the IPDI trust is not aggregated with Mrs U’s estate on her death so does not suffer a charge to IHT before the net capital is distributed to Mr U’s children. The IHT exemption means the full amount of Mrs U’s NRB is applied against her estate - protecting it for the benefit of her own children. Mr U sets up an immediate post death interest trust in his Will, to provide Mrs U with an income after his death and to direct his capital to his children. Immediate Post Death Trust (IPDI) 2 years The IPDI trust is invested into a BR qualifying investment on Mr U’s death. BR Mrs U survives her husband by more than two years and the investment is still held at the time of her death, so capital invested is IHT exempt thanks to BR. IHT exempt Mrs J sets up a whole of life plan in trust that will pay out a lump sum of £200,000 tax free when she dies. In her 70’s She suffers dementia and needs more specialist at home care. The proceeds allow Mr J to cover all funeral expenses and for the children to use the monies to assist with school fees for their own children. In her early 60’s She suffers a stroke that leaves her with mobility problems and needing help to look after herself. The policy pays out £20,000 to assist with conversions to the house. Her husband takes early retirement to help look after her Her policy pays out £80,000 for home care costs, including more carers & further home conversions Mrs J dies in her 80s The policy has already paid out £100,000 to fund care costs, but the balance of the plan (the life assurance element) now pays out to her beneficiaries. Because the plan was set up in trust the death benefit is paid out to Mr J and their children without forming part of Mrs J’s taxable estate. The plan can offer assistance for care costs whilst she is still alive - payments of 50% of the sum assured if she suffers from ill health and is no longer able to look after herself. 86 87 CASE STUDIES CASE STUDIES