Wills & Probate

How can you safeguard your family’s accumulated wealth?

The main concerns, when making a Will, are often the need to provide for loved ones whilst keeping the inheritance tax liability to a minimum.

It is also important, however, to consider how a family’s accumulated wealth might be safeguarded, especially given the increasing age of the population and the need for long term care of the elderly.

If a spouse has to go into long term care, a family’s assets may diminish rapidly in covering the costs as care home fees are often not paid by the local authority. The situation is more serious if one spouse leaves their whole estate to the surviving spouse and that spouse then needs to go into a care home because the accumulated wealth of both spouses (including the family home) may be used to fund that care.

Increasingly, therefore, couples are including Immediate Post Death Interest Trusts in their Wills.

By putting a share of the family home in an Immediate Post Death Interest Trust, the trust assets are effectively ring-fenced for the beneficiaries of the trust.

Under an Immediate Post Death Interest Trust, a surviving spouse may therefore be entitled to live in the family home and receive the income from any investments held on trust in their lifetime. The surviving spouse is not entitled to the capital from the share of the property or the investments held in trust, and as a result those assets are not taken into account if the surviving spouse requires care. However, any income from those investments may be used to pay care home fees.

Furthermore, there are no adverse inheritance tax consequences when leaving an estate to a spouse or civil partner on Immediate Post Death Interest Trust because any share of the estate passing to a spouse or civil partner is exempt from inheritance tax regardless of whether they are inheriting the estate absolutely or on trust. There may however be inheritance tax to pay on the death of the survivor.

The rules relating to Immediate Post Death Interest Trusts can be complex. If you would like advice concerning any of the above, please do not hesitate to contact Clare Fleming at our High Wycombe office on 01494 450171.