Protecting your Assets
It is vital that you make arrangements to protect and make
arrangements for all your assets.
How can you protect your assets?
Gifting your assets
It is common for people to consider making
gifts to family members with a view to keeping those assets in the
family. In particular, the main asset that many individuals
consider giving away is their property, or a share in it, to their
children during their lifetime or in their Will.
There are many reasons
why you may want to make a gift during your lifetime, or to pass it
to your children, as opposed to your partner, on death. Such a
transfer may be made in recognition of the care and
support your child has provided to you, to avoid
administration delays on death or to pass on the assets to loved
ones.
The risks
We would not usually
recommend that you transfer your assets without carefully
considering your financial security as once a gift is made there is
no turning back.
In particular, we would
not suggest that you transfer the ownership of your property
outright to someone else where you or their partner continues to
live there. Problems may arise should one of the recipients
of the gift suffer from financial difficulty, or a divorce, or a
family disagreement. Therefore, it is essential to take advice
before making such a transfer as it may be better to transfer the
property to a trust rather than directly to children.
The Family Trust
It is possible to
transfer your assets to two people (known as Trustees) who would
then hold those assets upon such terms as is agreed between you.
The asset most commonly transferred is the property. The terms of
the Trust would usually stipulate that, although the property is
held for your children, the children will not be able to sell the
property whilst certain people continue to live in the property. It
is even possible to stipulate that the property can be sold at any
time with a view to buying a more suitable replacement property
which would also then be held on the same terms.
By transferring a
property, or other assets, into a trust it is possible to offer a
degree of protection to the equity in the property for the benefit
of children.
As there can be tax
implications in setting up these arrangements, it is essential to
take advice before proceeding.
Paying for care
If you need long term
care in the future but fall below the required criteria for
the NHS to award you fully funded care (known as Continuing Health
Care) then your assets will be assessed to see if you are able
to fund your own care.
If an individual holds
over £22,000 (in Wales) or over £23,250 (in England) then you will
need to meet the costs of that care.
If you own a property and
either their partner, or certain other categories of individuals,
do not continue to live in that property, then the value of that
property may be included in your financial assessment.
What if you need care and you have
given assets away?
If you have given assets
to your children, or you have transferred assets into a family
trust, then the value of those assets should not be included in
your financial assessment.
However, if the Local
Authority can show that the assets were transferred to avoid paying
for care then it is possible for them to still include the value of
those assets in your financial assessment as notional capital. It
may even be possible for the Local Authority to send the bill for
care to the family member who has received the transferred assets.
It is therefore important to take advice on the risks before making
such a transfer.
Wills
If you feel uncomfortable
with transferring your assets during your lifetime but you still
want to offer them some protection in the future then you should
consider reviewing your wills.
The majority of people
usually want to leave their assets to their partner on their death.
By doing this you place the entirety of your assets at risk should
that partner have financial difficulties, or if they enter into
another relationship or they need care in the future.
If you want to be certain
that your assets will pass down to specific individuals in the
future (ie. your children) then you may wish to consider leaving
your assets to them on first death or to set up a family trust in
your will.
As discussed above, there
can be risks involved in making an outright gift to family members
as, in the case of your will, this could leave your partner
financially vulnerable. It could also result in your partner (or a
third party on their behalf) making a claim against your
estate for further financial provision. As a result we would
usually recommend a family trust as this helps to reduce these
risks.
There are different types
of trusts that can be used depending on the value of your assets
and whether you are married or in a civil partnership. However, the
overall aim of each of the trusts is to provide your partner with a
right to enjoy the assets but to protect the capital from a claim
by a third party. This would include a right to live in the family
home and to buy a replacement property if it is needed.
More information on writing a will
Take Financial Advice
In addition to the above,
it is important to review your savings and investments to ensure
that they are in the best place to produce the capital growth or
income to assist you to meet your financial commitments in the
future.
More information on taking financial advice