saving for care
andymixed01
Posts: 7 Forumite
A 80 year old single male friend of mine saved several ISA to pay for his care home.
He passed away 5 months ago
tax man now wants 40% of his savings for iht
surely he wasted his time trying to provide for his old age
Comments please
Andy
He passed away 5 months ago
tax man now wants 40% of his savings for iht
surely he wasted his time trying to provide for his old age
Comments please
Andy
0
Comments
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Most people don’t go into a care home.
Did he take any financial advice?
Don’t know the size of his estate but he might have been better off taking an annuity (an insurance product that pays for care) if that was cheaper than 40% of his estate.
On the face of it sounds like a failure to take financial advice as they would have mentioned things he hadnt thought of (like IHT avoidance).0 -
My comment is the same as last time you posted this, as per https://forums.moneysavingexpert.com/showthread.php?p=74882064&highlight=#post74882064:
Answer: "in order to pay for care in later life", and hopefully he succeeded in achieving this, by taking advantage of the tax benefits while saving or investing.andymixed01 wrote: »Bit late now but my 80 year mate saved several isas over the many years in order to pay for care in later life.
He passed away about 5 months ago and now the gov is taking 40% of his isa savings for IHT.
thoughts why did he bother?
Andy
However, ISAs have never been exempt from inheritance tax, so if he'd wanted to minimise that then he should have taken some advice on how to do so earlier on....0 -
It's sensible to have savings or investments to help pay for the cost of care in case you need it.- some council-funded care homes are not a great deal of fun and when "living in a home getting care" is all you have going on in your life, you want it to be a good one. When you are used to a reasonable standard of living, failing to put money away to provide for that eventuality is a mistake a lot of people make.andymixed01 wrote: »A 80 year old single male friend of mine saved several ISA to pay for his care home.
He passed away 5 months ago
It's a shame that he died. Happens to the best of us. Sorry for your loss. At least he won't have to use his ISA money to pay for living expenses and/or care home costs for the next 25 years. They will now just form part of the pot of money which can be given to his friends and relatives.
Yes, that's how it works. If you and your spouse have given away (or have left to others when you die) literally hundreds of thousands of pounds, only the first several hundreds of thousands of pounds is free of IHT , up to your allowances. 40% IHT is payable on the rest - not on all your assets, just on your assets beyond that first few hundred thousand.tax man now wants 40% of his savings for iht
Is it a waste trying to become a wealthy man to ensure you have a comfortable life? Some of those with a less comfortable life probably wish they were more comfortable. Some of those who die before spending their last pound probably wish they had worked less and consider some of their savings effort to be a bit of a waste. Like if you buy car insurance and then don't accidentally crash your car killing or paralysing someone, or you buy house insurance and the house doesn't burn to the ground or get burglarized. What a waste of time being sensible and buying the insurance...:beer:surely he wasted his time trying to provide for his old age
Comments please
Andy
Perhaps as you are his friend rather than an executor of the will, you have not got all the facts on how IHT is applicable to his estate. If IHT is payable on some or all of his ISAs it meant he amassed a relatively large amount of assets to first use up his (and his spouse's, if he had one) nil rate band for IHT. If 40% is being paid on all the ISAs, it means 0% was payable on a lot of other stuff.
Maybe his heirs are happy to be left with 60% of something, instead of him not 'wasting his time' saving for his old age and then they could have had 100% of nothing instead. If he had lived longer and hadn't funded the ISAs, and used up his other assets, those friends and family dipping into their own pockets might have been the only way of him having the necessary tens of thousands of pounds a year to be able to choose his own care provider. They are probably happy it didn't come to that?0 -
Having seen two elderly relatives go into care in recent years, the difference in the homes between the selffunder and the council funded home was significant. Having seen that, I’d always far rather I had the money to pay for care even if my estate was later taxed. I can’t think of anything worse than being stuck somewhere horrid with no choice.0
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And what if he had fallen ill and actually needed round the clock care - and had no money so he ended up with a council carer coming round for 10 minutes twice a day?
I agree the system is unfair - particularly in the way a house worth millions can be ignored for means testing for home care and benefits such as pension credit but have more than £23k in the bank and rent you get zilch!
Still I expect his beneficiaries would rather have 60% of a lot - than 100% of nothing. He did the right thing - even if it wasn't necessarily the most financially prudent. Good on him for that!0 -
To pay IHT he must have above the allowance so why is it unfair to pay some tax? It's only 40% on the amount above so there's still a big wedge of cash going to the beneficiaries.Remember the saying: if it looks too good to be true it almost certainly is.0
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ax man now wants 40% of his savings for iht
surely he wasted his time trying to provide for his old age
There are ways to reduce your IHT liability. Pensions, investments in trust, gifting etc.
You dont say the size of the estate but the 40% is only charged on the excess over the IHT allowance (and pensions are not in the estate, so they would not be included). So, this was probably quite a large estate.
If you have assets that are going to take you into the IHT liability range then its usually best to seek advice on ways you may be able to reduce the liability.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
I look at this the other way round, currently our joint estates will be subject to IHT and the main reason for that is that if nessasary we want to be able to self fund high quality care for at least 5 years each, and to be able to do so without the need to sell our home while one of us still needs it.
I hope we never need to use that resource but if we do each pound spent on care will reduce the final IHT bill by 40p.
Considering we have already given considerable financial help to our children, and will be able to leave them up to £1M tax free, we don’t consider any IHT that could fall on our estate to be unfair.0
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