Mitigate Any Potential IHT Liability Flashcards

Question

As a self funder, explain the state benefit could Kathy claim?

Answer 1

Attendance allowance If she pays her own care Can also claim the first 4 weeks of care home stay if local authority or NHS pay Lower rate if care is needed during the day or night Higher rate if need both day and night Tax-free Means tested

Answer 2

Type of impaired life annuity No income tax if paid directly to care provider If not, it is taxed in the same way as purchased life annuity Purchased with own funds at the point of needing care Pays out until death (even in recovery) Indexation is available to protect against rising care costs Can guarantee Inflexible Eligibility is determined by the inability to perform one or more activities of daily living Often effected by LPA

Answer 3

Benefits paid after a few months or years Suits people who have funds to pay for care for a while But want protection if care continues Kathy has significant wealth It's cheaper than an immediate care plan Can be used as a backstop ie 5 years self-fund, then kick in Given when life expectancy is fairly low for low-cost policy Provides peace of mind

Answer 4

Take out an interest only mortgage on home Lump sum given or drawdown pot to simulate income Interest can be paid or rolled up Amount borrowed and built up interest to be paid back on death or moving to LTC facility The compounding effect on interest can erode the value of the home quickly Mortage can reduce RNRB on este Mortage reduces IHT payable on estate as a loan that needs repaying Inflexible when started

Answer 5

Sell part or all of home to home reversion provider Stays in home as a tenant, either rent-free or for nominal rent. Higher rent for larger lump sum Lumpsum or drawdown pot No interest payable Provider gets thier share of house on Kathy's death or move into care facility No RNRB is available if the whole property is sold IHT reduced if lump-sum spent Inflexible once committed to

Answer 6

Remains sole owner of home Choice of lump-sum or income through drawdown Interest roll-up means Kathy's cash flow not affected. Kathy can remain in home for life Some lifetime mortgages protect a percentage of property for inheritance purposes Money released is tax-free Can be fixed rate to guarantee how much loan will grow over time Some lifetime mortgages allow loan to be transfered to new property Can have zero negative equity on interest

Answer 7

Rolled up interest can erode value estate Interest grows over time and is compounded Releasing equity could affect Kathy's eligibility for certain means-tested state benefits depending on how they are used Taking out a lifetime mortgage may restrict downsize or apply further equity to the house Lifetime mortgage rates are generally higher than standard residential mortgage rates Penalties paying mortage early Equity release could affect children's IHT Set up fees, valuation fees, and legal fees

Answer 8

Sell only a portion of the house, preserve inheritance, No compunding Lump-sum or drawdown pot avialable Retains right to live in home for life Percentage of home sold fixed at outset Risk of property value falling is shared with provider

Answer 9

No longer own part or all of home (Conflicts with Kathy's sentimental attachment) Home reversion company pays less than market value Feeling a portion reduces inheritance for children Once sold, it can not be reversed, and future equity can not be accessed Money received could affect means-tested state benefits and LTC Selling a share in property could limit Kathy's ability to move in the future Costs for valuation, legal, and setup. Miss out on price increases Permission must be sort to make alterations to house

Answer 10

To allow her finances and decisions on health to be handled in the event, she is unable to handle them herself

Answer 11

Attorney has limited power to make gifts other than to charity or for customary occasions therefore cannot do much IHT planning without the permission of the court of protection

Answer 12

Complete prescribed form Must be signed by Donnor Attorney Replacement attorneys The certificate provider Certificate provider confirms donnor understands effect, are doing so of own will and there is no fraud Witnessed by one independent person Process takes 4-10 weeks Can be done anytime after LPA is created, even if the donor is mentally capable. 3 week period during which people can object

Answer 13

Write a will To reflect her new circumstances as a widow and wishes regarding estate Execute deed of variation Cresting a will trust in Alan's will If IPDI, Kathy as life tenant, children and grandchildren as remainderman She has access to funds during her lifetime, children and grandchildren inherit on death Funds in her estate on death but no periodic or exit charges Alan's NRB still avialable for estate If DT, children, and grandchildren as as beneficiaries Funds outside estate on death No periodic or exit charge under NRB Growth on assets outside Kathy's estate Alan's NRB not available on Kathy's death, but could inherit a new spouse full NRB If afordable, set up regular savings plan for grandchildren Fund from income so exempt under normal expenditure rule Junior ISA if tax efficiency more important than control Or OEIC/collective trust if prefer control Gradually reduce state over time SL WOL policy under trust of executors for sum assured on Kathy's death Provide any remaining IHT liability Establish LPA To ensure decisions can be made for her in event that she is unable to do so herself

Answer 14

whole of life Single life, Kathy For IHT liability until Kathy's Death level term life assurance that pays out lump sum on death index to keep up with inflation Guaranteed premiums to remain affordable Waiver of premiums to ensure remains paid if unable to do so In trust with executors as trustees to avoid probate and keep out of estate Premiums covered by annual exemption or normal expenditure To not increase IHT Provides peace of mind IHT liability will be covered on death

Answer 15

Might not be enough Estate may increase quicker than inflation Estste may decrease, leading to over-insurance IHT still needs to be paid Reduces disposable income in retirement Reviewable premiums may become unaffordable

Answer 16

C Increase or decrease in size of estate Change in health Change in objective New marriage or relationship New grandchildren Change in ATR or capacity for loss Any change in expenditure leading to reduction in standard of living Any gifts made We're DOV/trusts created Were wills/LPA set up L Changes in economic conditions Changes in legislation regarding or taxation that would affect this goal C Cost relating to any IHT products used Any new and more suitable products to use

Mitigate Any Potential IHT Liability Flashcards

(40 cards)