Tax and Care Home Fees

Hoof_Hearted

This is a bit complicated and I will find an appropriate expert in the near future, but would appreciate your views.

Mother-in-law is gaga and in a residential home with nursing care. Fees are around £1,000 a week, but some of this is offset with benefits (DLA etc.). She is not wealthy but benefits from the income only from an offshore (Jersey) trust set up by her brother (now deceased). She has a life interest only.

What happens at present is she gets the income, UK tax is paid on it and it then pays her care home fees. I know there is no tax relief on fees (which seems harsh), but suppose the trust paid her fees directly? Obviously, she would be better off but fees are rising rapidly. Is this just a benefit in kind and subject to tax? Any way around it, other than finding her a home in Jersey?

SeniorSam

I would suggest that you seek the advice of a good solicitor regarding the Trust. It may be that as your Mother-in-Law has a lifetime interest, the whole value of the Trust fund could be considered as being owned by her, even though we know it's not and it will eventually pass on the the remaining beneficiaries.

There was a window of opportunity a few years ago, when the life interest could have been cut off and considered as a Potentially Exempt Transfer, although in your Mother-in-Laws case, with assets below the nil rate band, it may not be necessary. Many people, who had someone to advise them, took advantage of that loophole, but those that did not, are stuck with the rules as they were. The solicitor would be able to advise you once he has seen the Trust documents and also advise you on the tax implications of the Trust paying the Fees. if that were permitted.

I hope this helps

Sam