LEGAL CORNER: Good financial housekeeping for the elderly

Many elderly people have reason to be concerned at the present time.

Major worries are:

:: Care

:: Investment

:: Inheritance Tax

:: Care provision

A care home of reasonable standard can cost over £500 per week.

If application is therefore made for local authority assistance, this will only be provided once the value of assets is below £23,000.

The family home and other investments are therefore at risk of significant depletion.

Early planning, in conjunction with family, can avoid problems later, especially by the use of trusts.

Many remain confused on where to obtain investment advice which is impartial. This has become more important since 2007, because interest rates have reduced substantially.

UK base interest rate has been 0.5 per cent for about five years. It may begin to rise towards the end of this year, but seems likely to do so only slowly.

Because of the above, current investment rates on offer from banks, building societies and the like remain low and when inflation is taken into account, there is a risk of capital depletion.

It is therefore important to take investment advice from regulated professionals with approved qualifications.

The present individual rate of Inheritance Tax is £325,000 per person, fixed until 2017.

While the forthcoming general election could result in a change of government and alteration to the IHT exemption, this cannot be guaranteed.

So early planning is important, if unnecessary payment of Inheritance Tax is to be avoided.

Planning includes what proportion of assets can be gifted.

Gifting can be absolute or it can be in a trust for asset protection, if family circumstances are difficult.

Years ago it was possible to make gifts and still retain an interest in the property gifted. This is now no longer possible due to the reservation of benefit rules, so any gifting has to be completely exclusive of the person making the gift.

It is obviously wise to consider

gifting during lifetime, to allow the necessary time to elapse for the gift to fall out of the calculation on death. This period is seven years and there is progressive relief from three years upwards.

Rates of Inheritance Tax are

40 per cent on death and 20 per cent during lifetime.

Many people do not consider these matters early enough, especially Inheritance Tax, so the inevitable beneficiary is the Exchequer! While tax evasion is illegal, it is perfectly legal to reorganise one’s affairs, taking professional advice which should not be delayed.