Deprivation of Assets ?

howden9

Hello - I'm thinking of Will making and if there are any implications for a local Council considering it as 'deprivation of assets' if we do not leave all (non property) assets to the surviving spouse?

e.g. if my wife and I both have Wills made so that (instead of all assets going to the surviving spouse) that cash and investment assets up to the prevailing 'nil rate band' goes to our children in the first instance. 

Albermarle

howden9 said:

Hello - I'm thinking of Will making and if there are any implications for a local Council considering it as 'deprivation of assets' if we do not leave all (non property) assets to the surviving spouse?

e.g. if my wife and I both have Wills made so that (instead of all assets going to the surviving spouse) that cash and investment assets up to the prevailing 'nil rate band' goes to our children in the first instance. 

It could only be an issue if you ever needed care, and needed council funding. If you do not ask for council funding, then they don't care about your finances.

howden9

Thanks @Albermarle just to give a little more context. We are in our 50s and are both in good health - no diagnosis of illness or need for care. 

If the Will with these intentions is all in place now (and we are talking about sole name assets) - but down the line the surviving spouse needs council funded care in the future I am wondering how the council could say it is deprivation of assets 

lisyloo

If its being done to avoid inheritance tax then it's not being done to deprive yourself of assets.
However do be aware that some council provision is very poor indeed and may not be close to family and friends, so you may wish to consider whether relying on subsistence level care in later life is what you want.

My dad and step-mum did this (neither needed care), but AFAIK the trust/will arrangements they made were perfectly valid and legal.
You need to get it done by a solicitor that understands trusts.

Savvy_Sue

If you have sole name assets, you can leave them to whoever you like, and as they never belong to the spouse DofA cannot be an issue. HOWEVER, be very aware of what lisyloo says, and do not deprive each other of the means of being able to pay for a very good standard of care, should that ever be needed. 

Also do check whether IHT is something you even need to think about. Anything left to your spouse is free of IHT. On the second death, there may be up to £1m which can be passed to your direct descendants free of IHT. 

Albermarle

howden9 said:

Thanks @Albermarle just to give a little more context. We are in our 50s and are both in good health - no diagnosis of illness or need for care. 

If the Will with these intentions is all in place now (and we are talking about sole name assets) - but down the line the surviving spouse needs council funded care in the future I am wondering how the council could say it is deprivation of assets 

So you have enough money to worry about inheritance tax, but the surviving spouse will maybe have to rely on underfunded council care in their most vulnerable years? You will have seen in the news that councils are already going bankrupt, and the growing need for adult social care is their biggest expense, so it will only get worse.
Plus maybe the council may well get the money back from the house anyway.
These things need thinking through very carefully, and not just from the angle of trying to pay less tax.

Keep_pedalling

Leaving up to your NRB to people other than your spouse does not save IHT as your spouses estate will no longer be able to claim the transferable NRB. These clauses used to be popular before the TNRB was introduced but are now virtually obsolete. 

Leaving you sole assets to anyone other than your spouse is not deprivation of assets as you spouse never owned those assets, however it is probable a terrible idea at your age as it is likely to leave the surviving spouse struggling financially. The main concern should not be care costs but what happens if your spouse remarries particularly the marital home. What many people do it to leave their share of the home to their children but give their spouse a life interest via an immediate post-death interest trust. This is something you include in your will and is something a local solicitor can advise you on. Avoid unregulated will writers and deffinately do not attempt to DIY it.

JustUseSellotape

On a practical note, many people do not live for long in care - the average is under 2 years in care, so having trusts, or giving away assets on first death, does not make a difference in many cases (especially where you have a reasonably big estate to start with). The local authority would have to argue that a planning decision was meant to deliberately deprive them - i.e. it doe snot have to be the key reason you did something, but one of a few possible reasons. It used to be that they had to show it was the sole key reason, but this was relaxed as local authorities found this hard to argue in most cases. 

Also, if you own a property jointly, and change to tenants in common (to benefit a trust on first death), this could be treated as deliberate deprivation (as you are depriving yourself of automatically inheriting the full property on first death). However, buying a property as joint tenants is not prone to attack in the same way, so you could leave a life interest for a spouse etc., without the risk of attack (as things stand and my understanding/experience). 

However, I would think it is rarely a good idea to leave a chunk to kids on first death, as it will be painful to watch, if they end up divorcing etc., and losing half of what you gave them, or they just spend it. Do what you think is good for you, and get professional advice. My take on solicitors versus willwriters, is that they can both give good advice, and many solicitors do not specialise in Will planning, but many will writers are more like sales people, as they often work on commission, so do your research - i.e. see what experience they have, and that they belong to a professional body like the IPW (solicitors have to belong to a professional body, and must have insurance etc.).   

Albermarle

On a practical note, many people do not live for long in care - the average is under 2 years in care, 

Plus the majority never go into a care home, or need 24/7 care at home.

Spendless

My Grandmother lived 8 years in a care home dying last year at almost 99. She had a long term friend in there who was in for around 7 years before death. At the point I started dating my husband his Grandmother was already in care and died 6.5 years later, when she was in her early 80s.

I would be careful of the assumption that you won't go into care or won't last long in there and I'd consider if you would be happy spending several years in LA funded care. Plan for the worst but hope for the best. 

Albermarle

Spendless said:

My Grandmother lived 8 years in a care home dying last year at almost 99. She had a long term friend in there who was in for around 7 years before death. At the point I started dating my husband his Grandmother was already in care and died 6.5 years later, when she was in her early 80s.

I would be careful of the assumption that you won't go into care or won't last long in there and I'd consider if you would be happy spending several years in LA funded care. Plan for the worst but hope for the best. 

Agree with the comments in bold, but on the other side many seem to assume that nearly everybody old ends up in a care home, and that Millions lose all their money and their homes to pay for it, which is not the case. Although some people are obviously badly affected, it is still a smallish minority that lose a lot.

Arranging your finances to try and avoid these fees ( as many do) can be a bad decision. As
a) It might not work
b) You might well never have to pay any significant fees and have needlessly got involved in expensive and complicated trusts and similar arrangements . Often under pressure from certain types of lawyer, eager to get their hands on the fat fees involved.