At Chancellor Financial Management, we’re often involved in complex financial planning scenarios and are happy to focus our expertise on achieving excellent outcomes for clients and their families.
Some of the most interesting (and emotive) cases we deal with involve someone needing to sell their own property and enter a care home.
As these cases often involve medical conditions such as Alzheimer’s, the presence of an existing Enduring or Lasting Power of Attorney can greatly assist the family to ensure that they can control the financial situation. And if formal planning has been undertaken early enough, the individual should have a valid Will in place that ensures their wishes are fulfilled in the event of their death.
Very often, after analysis there is a shortfall between the care home fees and the ongoing private and State Pension income, and our involvement is often around providing for this.
We undertake extensive discussions with the family to ascertain their relative’s state of health and any shortened life expectancy – or otherwise, whether a longer term investment horizon can be considered. Discussions would also take place with the attorney as to the risk levels and capacity for loss and putting together an investment proposal for all or some of the remaining liquid funds (from the house sale and/or their existing assets) to cover any shortfall. It’s important that the provisions of the Power of Attorney are closely scrutinised before advice can be given as this can affect the types of investment that can be completed.
As well as covering any income shortfall, many clients understandably wish to ensure they maximise the amount passed on when they die. Whilst the relatively recent introduction of the new Residence Nil Rate Band has increased the amount that can be left tax-free for many clients in the event of their death, in some cases it’s possible to retain this valuable allowance if someone downsizes or sells the family home. It’s important to keep detailed records in these circumstances.
Inheritance Tax planning under a Power of Attorney can be difficult as it’s not usually possible to make substantial gifts to family members with a view to reducing the inheritance tax liability. Another consideration is that whilst many of our clients do utilise the option of using life insurance cover to cover any potential tax liability, often this is impossible in these circumstances as due to the client’s state of health and age, the cost of cover may be prohibitively expensive.
At Chancellor, we have recommended to some clients the use of investments that can benefit from Business Relief and therefore gain exemption from Inheritance Tax after the investments have been in place for as little as two years. These can be used in Power of Attorney cases as they are investments and not classed as gifts, and their use has resulted in some very substantial tax savings. These investments are not suitable for everyone, but are certainly worthy of consideration in the correct set of circumstances.