Monthly Archives: July 2012

Private Education for Grandchildren

The cost of Private education for grandchildren

(To discuss trusts for private education for grandchildren, contact us.) On with Duncan Lawries PR:

It now costs in excess of £500,000 to send three children to private school, according to latest figures from Duncan Lawrie Private Bank. This will involve a significant financial sacrifice, even for a wealthy family. One way to help pay the bill will be for grandparents to make a contribution to private education for grandchildren, which can be done by setting up a discretionary trust. This has the double benefit of efficient inheritance tax planning, whilst at the same time funding the grandchildren’s education.

Paul Barry, a Chartered Financial Planner at Duncan Lawrie Private Bank, commented on private education for grandchildren:

“School fees will have to be paid for 10 years before all three children complete their education, assuming they start at age eight. At its peak, with all the children at school at the same time, the cost will hit £60,458* in one year alone. The demand on the parents’ finances is therefore considerable, which is why grandparents often offer to help out, but all of this requires very careful tax planning.”

Grandparents can individually offset the maximum amount of £325,000 permitted under the inheritance tax threshold, known as the nil rate band. This means a discretionary trust set up to help with private education for grandchildren will not have an immediate tax bill. Assuming the grandparents live for a further seven years after the gift is made, the capital is outside their estate for inheritance tax purposes.

Even though the money is in a trust, the grandparents retain control of it, including  making distributions of capital directly from the trust to contribute towards the fees for private education for grandchildren in the most tax efficient way. Trustees can also invest and manage the underlying trust fund using various asset classes such as cash, fixed interest and equities, timing dividends and interest receipts to match fee payments.

Paul Barry adds:

“Creating a discretionary trust, along with long term financial planning, enables us at Duncan Lawrie Private Bank to tailor solutions according to individual client needs. For instance, we can point out that flexible trust rules allow payments for grandchildren who have not yet been born, or cover any future change in circumstances such as divorce.”

*Figures are based on UK averages from the 2012 census from the Independent Schools Council, assuming three children attending day school between the ages of 8 – 18 and school fees rising annually at a rate of 5%.

Stephen Pett of TPD Ltd Legacy Trusts (that’s us on this site) added:

“The Home Protection Trust is just a variant of a lifetime trust specifically designed for a home to go into.  It is great for funding private education for grandchildren – but not until you have died!  If you are looking to finance private eduction for grandchildren during your lifetime, we use a different (and cheaper!) variation.  Just let us know that you are looking for your trust to provide help with private education for grandchildren.

Trusts for Private Education for Grandchildren

Right To Buy Problems Loom Large

Right To Buy moved 2,000,000 homes into private ownership.

Many of those right to buy homes are now at risk in two ways, and their owners and those who subsidised the purchase need to contact us.  This could prevent total loss of their Right To Buy homes to their families.   For some, we are afraid it will be too late.. and that was how this topic was started. families all over the UK are losing out, now.

Is that fair?”

Right to Buy helped by children.

Right to Buy HouseMany parents couldn’t afford to buy their own council or housing association home without help.  Hundreds of thousands of children rushed to help their parents with deposits or mortgage guarantees.   In most cases, those children expected their financial help to be repaid on the death of the parent, with an appropriately worded Last Will.

But in practice, many are getting NOTHING – find out why….

Right to Buy to Help Children.

These  parents were a bit better off, and they wanted to be sure that future generations of their family had the ability to buy their own homes, and not to be at the mercy of the Local Council or Housing Association.  In many cases, they have succeeded, but in many more their generosity and sacrifice will be wasted and they will get NOTHING back…

The Spectre at The Right to Buy Feast.

Funnily enough, the spectre is the Local Council.   Having given you the Right to Buy, they are now greedily looking for opportunities to grab the home back from you.  And in many cases they will succeed.

It all comes down to where you have enough income (between £50,000 and £75,000 a year EACH) to pay should you need care in your old age.   If you haven’t enough income or capital to fund it, then the Council will eventually want to sell your home to fund the care.   They won’t throw you out of it, or any young children or retired relatives, but ultimately they will sell it and take the money.  If you die promptly enough, there might be some change left over.

But my children funded the Right to Buy!

There is a fair chance that they can kiss goodbye to their money, and watch it disappear into the Local Councils coffers.  In most cases the children won’t be on the deeds, so they have no clear rights.  Even if they are on the deeds, the Local Council may legally cut their share by up to 70% – that is nearly three quarters ripped away.

But I left it to them in my Will!

But in a Will, you only leave anything you still own – if the Local Council have already grabbed your Right to Buy home and sold it, or put a charge on it, it is too late.

What should I do?

Simple, all Right to Buy owners should contact us urgently.

The Government refuses to commit to capping the cost of care

The Government refuses to commit to capping the cost of care

for the elderly, saying it has to wait until the spending review.

Anyone who though the Government were finally going to resolve the issue of long term care fees is in for a disappointment.

Capping the cost of care was raised as an issue by Tony Blair back in 1988.  It has been rumbling on as an issue since then.

If you want to live in cloud cuckoo land, you can ignore the issue, but if you want to look at capping the cost of care for your family, you need to take action well in advance.

Care fees for many folk are now running in excess of £1,000 a week.

Overhaul of social care is long overdue, says Law Society

Overhaul of social care is long overdue, says Law Society

A long-awaited white paper on the future of social care, published today along with a draft social care Bill, is a rare opportunity to unify and modernise existing legislation and must not be wasted.

Commenting on the launch of the draft Bill, Law Society President Lucy Scott-Moncrieff said: “Simplifying and unifying a mass of existing statute is an arduous and complex exercise.  The aim must be to improve the experience of those requiring care”.

The overhaul of the legislative framework is set against a background of reduced spending on social care and a need for clarity on how the system will be funded in future.

The Law Society responded to the Law Commission’s initial proposalsin its extensive consultation on Adult Social Care in July 2010.

Susan Thompson, Chair of the Law Society Mental Health & Disability Committee, said: “We welcome this significant step to simplify what is currently complex and largely inaccessible legislation to all but specialists. Reform will benefit those in need of care and those who support them in navigating the system. Hopefully we will soon see clarity on how the new framework  will be funded and implemented”.

Lucy Scott Moncrieff commented: “This is a rare opportunity to create a new legal framework based upon advanced principles of social care including person-centred planning, personalised budgets and portability of care packages. The Law Society will carefully consider the detail of the draft Bill and work with Government to ensure that that the new law protects and supports those needing care.”

Overhaul of social care is long overdue.

Social Care Debate

Reaction to Government’s White Paper on social care

Equity Release Council’s initial reaction to Government’s White Paper on social care
Andrea Rozario, Director General of The Equity Release Council, comments:

“While we are obviously delighted that the Government has recognised the important role that housing equity can play in paying for care, we have some serious reservations as to the approach and overall lack of clarity.   Do local authorities have the finances or the expertise to make this scheme the success that it needs to be?   What will the set up cost be?   What sort of rates will Councils need to charge to keep the schemes running?

“The overall lack of clarity and the move to side-step dealing with the key issue of funding suggests that rather than trying to seriously tackle this problem, the Government is looking to buy itself time.   Consumers, councils and care providers as well as the financial services industry need clarification.

“The Government’s refusal to lay out a clear financial frame-work is huge cause for concern.  While obviously the system needs to deliver good value to tax-payers and excellent care for consumer, delaying making any concrete decision for up to two years is doing everyone a disservice.  How can anyone plan their retirement if they don’t know how much they should budget for care?

“The Government needs to provide details on these proposals as soon as possible.   The UK’s over-55s do have access to £250 billion in housing equity but we need to ensure that we provide a fair and defined framework so consumers can make informed choices about their finances.”

Older women feel let down by the coalition on care reform

Older women feel let down by the coalition on care reform.

  • 78% say delays to social care reform are unfair
  • 68% of older women say recent Government policies have been unfair
  • Increase in state pension age, tax increases and lower winter fuel allowance have also had an impact

Amidst fears that the Care and Support White paper this week will not fully address the funding crisis in the UK’s care system, new research* from Saga reveals that women over 50 are disillusioned with the current Coalition Government.

The Coalition’s delays to reforming the social care system and the lack of commitment on funding have been branded as unfair by over three quarters (78%) of women over 50 making it the issue most at odds with the needs of Britain’s older women. This figures increases to 80% amongst those over 60 and those in the ‘squeezed middle’ income bracket.

These women’s feelings have become even stronger since the recent Budget. In March, just over half (55%) of older women believed Government policies had been unfair to older members of society but in April 2012, after the Chancellor’s announcement the figure has increased to more than two thirds (68%)

Saga urges the Coalition to put more emphasis on older women’s circumstances and needs in future policy decisions – protecting most pensioner benefits is not enough to offset concerns about the urgency of providing more care funding or improving women’s pensions.

Ros Altmann, Director-General of Saga comments, “The frustration amongst older women in particular with delays in promised reforms of social care funding is clearly having an impact on their feelings towards the Coalition Government. Women over 50 tend to form the majority of carers or of those needing care. Therefore the delays to reform and lack of commitment on funding impact upon this demographic most severely. The numbers of people requiring care continue to increase so more may use their life savings to pay for care if they don’t qualify for NHS or council funds. Funding is the crucial missing piece of the care puzzle and the longer the system is left as it is the more people will suffer unfairly. Delaying decisions on the funding needed until the next spending review ensure that the care crisis in the UK will continue. No more delays, reviews and consultations, we need urgent action.

“There has been a wide range of policy decisions impacting upon older generations this year and it is clear from this review that older women are not satisfied that their needs have been properly considered. It is our aim to use the unique insight we have from our customer base into the older demographics to help inform Government policy decisions.”

Women over 50 unhappy about other recent policy decisions too

  • Lower winter fuel allowance

While the delay to social care reform is by far the issue most distressing older women, the lower winter fuel allowance is also a source of contention with 55% finding this unfair – increasing to 70% amongst women in lower income groups who will struggle with the lower allowance.

  • Increase in state pension age

The over 50s are generally opposed to increases in state pension age, although this is more strongly felt amongst women. Over half (55%) of women thought the increase to their pension age was unfair – unsurprisingly increasing to 69% for those in their fifties.

What do YOU think?

Social Care Debate

Summary of women’s attitudes towards recent policies

Unfair Fair Neither/don’t know
Delaying social care reforms 78% 4% 18%
Changes to personal tax allowance 68% 16% 16%
Lower winter fuel allowance 58% 18% 24%
Increased state pension age – women 55% 25% 20%
Tying future pension increases to CPI instead of RPI 45% 18% 47%
Abolishing default retirement age 27% 38% 35%
Retaining universal pensioner benefits 10% 56% 44%

Care White Paper is meaningless with no additional funding

Care White Paper is meaningless with no additional funding

  • Government has merely stuck a plaster on a wound that gets worse underneath

Dr Ros Altmann, Director-General of Saga, comments: 

“Finally the Government has admitted that a radical reform of the care system is necessary to address the need for dignified care. However, without committing to the additional funding, the Government has basically given people the rights to decent care without the money to exercise those rights. Up and down the country families will still face losing everything if the level of care they require does not qualify for NHS or council help. Those who have put savings aside throughout their lives remain at risk of losing everything, while those with no assets receive free care.

“Will this system stop people from losing their life savings including their family homes? The answer is no – people will still lose everything and there is no proper fair partnership between the individual and the State. Government has failed to reform the unfair means-test which takes away everything above £23,250 and the money simply isn’t there to ensure people don’t lose out so unfairly.

“The suggested ‘universal deferred payment’ loans may merely delay people having to sell their homes but does not set a limit on how much people should spend on care. We also do not know what interest rate will be charged on these loans.”

THE GOOD NEWS IS:

15 minute home care visits to be abolished 
It is good news that councils have been instructed to ensure visiting hours of only 15 minutes will no longer be permitted but again, how can this be possible without additional funding.  The answer is that more people will be denied care of any sort as councils manage budgets.

Free care for terminally ill 
Although the funding source for this remains unclear, it is welcome news that free social care for life will be offered to those that are terminally ill – anything that can be done to ease the last days of someone’s life is always going to help them and their family.

Portable assessments
These will encourage more people to be assessed to see if they qualify for council help with their care needs which will hopefully mean more people who do qualify for it will receive help with care costs.

National standards for care
At last we have some guidelines for a national standard for care, instead of each regional local authority operating within different standards. This has always been the case for ‘health’ services and care should be no different. However, we do not believe it is right to punish councils who have struggled to maintain care for those with moderate needs while others have rationed care funding more stringently.

Rights for carers
It is, of course, important that we properly look after and value those who are caring for others. Giving them rights to an assessment is, however, not going to deal with the underlying problem of underfunding. If carers do not receive proper help, the NHS will pick up the pieces as their health deteriorates.

Personal Budgets, more choice, more focus on the individual 
Of course the Government’s aim of allowing families to choose how best to spend money to support those needing care is welcome. But giving people more rights and more choice, without increasing funding, does not make things better.

BUT THE WHITE PAPER STILL LEAVES THE CARE SYSTEM IN CRISIS:

Will it incentivise people to save for care – NO
We urge the Government to introduce a new Care Savings Allowance for the over 50s in the next Budget to allow tax free savings towards care for themselves or their relatives. Even if care funding is radically reformed, individuals will still have to fund a portion of their care costs themselves so it is vital that we help families put money aside just in case.

Will the current £23,250 cap for means-testing be increased to a more reasonable level – NO
This has yet to be decided. Andrew Dilnot suggested a raising the cap on the means-tested threshold to £100,000 and we think this vital to protect the life savings of those with modest means. There is no firm proposal for this, so the current unfair system remains.

Will it help people prepare for care – NO
Without more certainty on how much people should pay for care, how can people plan? And if no cap is decided for another two years minimum, it will be difficult for people to insure themselves against these costs.

Will it relieve pressure on the NHS – NO
Without a commitment to funding there is no guarantee that more at home care will be provided early on meaning more people ending up needing more costly medical care putting immense pressure on the NHS.

Risks to the NHS – This issue is not just about looking after older or disabled people. It will affect families up and down the country and ultimately all of us, because the NHS will be unable to keep picking up the pieces of our broken social care system. Getting social care right, helping people plan and prepare properly and look after themselves, will save money and resources in the NHS. Failure to reform care will end up costing us all far more when the NHS safety nets break down.

Will fair and decent care be offered to all – NO
Ultimately, this reform does not go far enough to offer fair and decent care reform. Without the additional funding that is so needed and incentives for people to save for their own care, our increasing ageing population will still be at risk. The Government has effectively stuck a plaster on a wound that is getting worse underneath. Covering up the issue will not really solve it.

Join the Social Care Debate – let us know what you think:

Social Care Debate