How Can I Protect My Assets As I Get Older?

Growing older may be inevitable, but so too is the fact that we all handle it differently.

Whether you're ready to put your feet up if and when you retire or planning on growing old disgracefully, it's common to have concerns about what will happen to your assets in your later years, especially if you need to go into residential care and on your death. Below, we consider some of the relevant costs and discuss possible strategies for managing your exposure.

Residential care

If you own assets above the current £32,750 level, you will be responsible for paying for your own care home fees. The problem is that to cover your costs, you may be forced to sell those assets to cover the care home costs, such as your home. Of course, this can be very difficult, as you may want to leave probably your largest asset, your home, to your loved ones after your death.

You can seek advice if you want your home not to be included in the financial assessment for your care home fees. Options include transferring your home ownership to another individual or into a trust, although even this is not a foolproof way to protect your home. The local authority in the area of your care home may see this move as intentional to avoid care home fees and may ask you to sell the asset anyway.

Another option is to change your Will to include a liferent trust, which means that when you pass away, your surviving spouse can continue to live in your home, although they will not be the owner of your share of the home. This can help reduce your spouse's assets to a level where they qualify for assistance with care home costs without the need to sell your home.

This is a complex area and a trust is just one option to protecting your home and it’s important to seek professional help.

Inheritance Tax Considerations

In addition to care home costs, it's also important to consider Inheritance Tax (IHT) when preserving your assets. IHT is a tax paid on the estate of someone who has passed away, usually at a rate of 40% on assets over the basic threshold of £325,000.

Gifting during your lifetime can be an effective tool in IHT planning, as it can reduce the overall value of your estate and the proportion exposed to IHT. There are exemptions for standard gifts and an annual tax-free gifting allowance of £3,000 per individual. Using this allowance consistently can help reduce excess capital over time. However, making larger gifts may involve more complex rules, so it's advisable to seek professional advice before using valuable assets as part of a tax-planning exercise. Get in touch to get tailored advice on your personal circumstances.