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THE PRUDENT INVESTOR: Here’s my plan to stop my savings being eaten up by care home bills

The Care Isa is the most barmy savings proposition since Gordon Brown
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The Care Isa is the most barmy savings proposition since Gordon Brown's totally batty Child Trust Fund

The Care Isa is the most barmy savings proposition since Gordon Brown’s totally batty Child Trust Fund

At the tender age of 59, holidays, restaurants and garden improvements are high on my agenda. Care homes are not.

So should I be excited by the prospect of a specialist Care Isa that would allow me to set aside money, while ring-fencing it from inheritance tax?

I love to grab a tax or savings perk. But surely a Care Isa — which, we’re told, is a priority for the Government — is the most barmy savings proposition since Gordon Brown’s totally batty Child Trust Fund.

Does the Government seriously believe that someone in their 30s or 40s would save for care when they’re struggling with mortgages, families and pensions?

I wouldn’t consider one until they carried me through the doors of the Fading Years Care Home.

Incidentally, Mrs H begs to differ. She reckons a Care Isa could focus people’s minds on the need to think seriously about what will happen to them as they get older.

We can all leave £325,000 of assets free of inheritance tax, while couples with children and property will soon be able to leave £1 million jointly.

And there’s a wonderful loophole looming. Surely you could just pay care fees from money sitting outside your Care Isa, leaving the ring-fenced money inside safe from inheritance tax. So another tax dodge for the wealthy, then.

This is not to belittle the care fees issue, which looms for us all.

In England and Northern Ireland, those with assets of more than £23,250 will be expected to self-fund their care completely, while those with as little as £14,250 will have to contribute something. 

(Limits and rules are different in Scotland and Wales.) For many, that can mean selling the family home and spending a chunk of our savings.

Many councils are becoming more aggressive in cracking down on those who deliberately try to deprive themselves of assets by giving them away.

Joel Lewis, policy and health officer at Age UK, explains that there is no time limit on how far a council can go back when claiming deliberate deprivation.

‘They can and do go beyond the seven years limit that operates for inheritance tax when giving away assets,’ he says.

There are two key tests:

a) Did you know at the time you gave away the money or property that you may need care and support?

b) Avoiding paying for care must have been a significant reason for you reducing your savings or giving away your home.

So, what can we do to safeguard what we have amassed after a lifetime of hard work?

We can all leave £325,000 of assets free of inheritance tax, while couples with children and property will soon be able to leave £1 million jointly

Well, if one of you looks likely to go into or need care, consider splitting assets first.

While the council can only take the share owned by the person needing care (usually 50 per cent), it does make calculating limits for funding simpler.

When it comes to your main home, the issues can be complex. Ben Tyer, a solicitor at GLP Solicitors in Bury, says: ‘If you continue to live in a property while your partner goes into care, the council cannot touch it under a rule known as property disregard. This also applies if anyone over 60, under 18 or an incapacitated family member is living in it.’

It can also help to each own half the home separately — known in England and Wales as tenants in common.

Mr Tyer says that if one of you dies, then their share of the property could be put into trust. If the survivor later goes into care, only their half of the property can be used towards the fees.

He tells me there would also be a question as to the value, because half a home is not worth 50 per cent of a whole home when put on the market.

An independent valuation should reduce the share the council can take and sale fees would also be deducted.

Another worry is that if you own the home together — known as joint tenancy — and one partner goes into care and outlives their spouse, the home would transfer to the person in care, giving the council access to all the money.

If it were owned as tenants in common, they would get access to only half the home.

Be wary if trading down when a partner goes into care, because the council may go after their share of the money realised. Equity release is also a minefield if care is on the horizon, as the council could try to grab half the money released, even if you’ve given it away. 

 ***

Last week, I spent a happy hour investing a bag of 2p pieces in a slot machine at Great Yarmouth. I used my skill, developed over decades of push ’em off machines, to try to win a tantalisingly perched keyring for Mrs H (who sat patiently reading her book).

At 2p a time, it was cheap and harmless fun. So imagine my disbelief when I read the Bank of England’s fatuous claim that scrapping 1p and 2p coins would not affect inflation.

Not for them perhaps, but, without the 2p, amusement arcade operators would doubtless switch exclusively to 10p pieces — a 400 pc inflation rate for those of us who play them.

I still carry the childhood scars of decimalisation, which meant the end of the big old one penny coin which gave 12 goes for a shilling or 240 for £1.

Bank of England officials are not usually seen in seaside amusement arcades. Perhaps it might do them good to put down their champagne glasses, pick up an ice cream and join the real world for a day or two.

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