It is gratifying when someone recites your words back to you. Jan, a client of mine, called me in the month past. She recalled the sentiment: ‘If you’re fortunate enough to be the beneficiary of an estate (or, if any substantial sum of money came your way) don’t take the cheque and run to the bank, speak to a professional like me about protecting your inheritance. Preferably me.’

Jan told me that her sister’s situation was as close as it gets to being identical to a case in the newspapers, that of Nina Thair.

Miss Thair was, at 29, diagnosed with multiple sclerosis. She’s wheelchair bound and must sell her flat to meet the costs of residential care – £4,800 a month.

Her House – Gone!

She has £70,000 of equity in her property with care bills of £30,000 and climbing. She was forced into early retirement – thus has only a small pension. It’s only after burning through her cash, that her local council will meet her care costs. We imagine her pension income will be considered when calculating what financial help she might be entitled to.

Jan told me about her sister. Alice, 45, needs care and is about to give up work. How not to waste the fruit of her life’s work subsidising the council?

Alice, wants to live, rather than merely exist. She knows the extras for a disabled person are expensive. She wants to pay for those herself while the council met the basic costs.

The Solution

The solution is simple. Alice’s flat might have to be sold and the ‘profit’ used to pay for her care – she’ll be allowed to keep £23,500. But it gets better from there.

The pension savings could be received not by Alice’s person, but by a trust of which Alice is the primary beneficiary. Brief recap: remember a trust at its simplest is a device to cleave the ownership and management of an asset (the pensions savings) from the enjoyment of the asset (Alice) and any and all income it generates.

Alice’s parents, Mr & Mrs Stevens are alive and well. When I wrote their wills a few years ago, none of their children stood to inherit anything absolutely. All the gifts to their children were through trusts. The wise add belt to braces.

Protecting Her Assets

Alice has now met – for the purpose of inheritance planning – the HMRC definition of disability. The Stevens could amend their wills to recognise Alice’s disability. Should she survive her parents, Alice’s inheritance could then pass to a disabled person’s trust, which receives more favourable tax treatment.

As said Jan, it’s not merely about saving tax – it’s about the family’s wellbeing. And thus, was I dispatched on separate errands to visit Alice on the one hand and Mr & Mrs Stevens on the other.

Jan is certain the fruit of her parents’ and her sister’s life’s work won’t now go to subsidise the local council.

To talk about protecting your inheritance, arrange a free, no obligation consultation.

What to Read Next: Too Young for LPA?
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