The ongoing issue of funding care in later life is one that receives much discussion and media coverage. Figures in 2016/2017 suggested the shortfall for care was in the region of 17.7 billion. Those that have worked hard all their life and paid tax throughout feel that it is unfair that the cost of care could result in them having nothing to leave their loved ones when they pass away.
The current system means a person can have assets of £23,250 before they are required to fully fund their care. Anything between that and £14,250 attracts a contribution from the Local Authority and once those assets fall below that limit then care would be funded. This of course leaves very little of a person’s life savings or assets which they have worked hard for all their life.
The idea for a ‘Care ISA’ has been put forward ahead of the Government’s social care green paper due to be published this autumn. Currently ISAs are taxed at death, despite being tax free during your lifetime. This results in people looking to spend those monies to avoid paying inheritance tax. The suggested ‘Care ISA’ would be to save for care in later life. The incentive being that anything in that ISA at the date of passing away would be exempt from inheritance tax and could therefore pass to the deceased’s beneficiaries.
This idea has been heavily criticised. The incentive would only benefit a small minority of people who fall into the realms of inheritance tax whereas as outlined above the level above which full care fees are payable is so low it affects a large majority of people. A large proportion of these people also do not have sufficient wealth to save enough to take advantage of this scheme or to provide for their care.
Whether this proposal progresses remains to be seen and we will of course keep you updated as to any progress and indeed the upcoming government green paper looking at the issue of social care in general.
If you require any advice on planning for your future do not hesitate to contact out specialist Private Client team.