Estate planning is key to preserving your wealth.

The sooner a person starts, the better.

With careful planning, Inheritance Tax or care fees can be managed. This will enable you to pass on more of your wealth on your death.

Concerns around Inheritance Tax and care fees often arise at an already difficult time. Once these matters have arisen, it is usually too late to put any meaningful protection in place.

Inheritance Tax (IHT)

Nobody likes paying tax, with the ‘death tax’ being England’s most unpopular tax.

With Inheritance Tax charged at 40% on estates above the available tax-free thresholds, specialist advice is essential to minimise your tax liability on death.

Effective planning should always be tailored to your individual circumstances.

Typical Inheritance Tax planning strategies include the following:

  • Creating lifetime trusts;
  • Incorporating tax-efficient structures within your Will;
  • Investing in assets that qualify for relief from IHT.
  • Lifetime gifting/ wealth transfers; and

  • Setting up Family Investment Companies (FIC’s).

At C.K Law, we can provide bespoke advice to suit your needs.

We advise business owners and farmers, with a view to reducing the risk of the family business/ farm having to be sold on death.

When estate planning is involved, there is no ‘one size fits all’. Estate planning is unique to your personal, family and financial circumstances, and long-term goals.

FAQ’s

IHT is a tax that may be paid on your worldwide estate when you die. It can also be charged on gifts you have made during your lifetime. Your estate comprises of everything that you own. This includes your home, personal possessions, savings, investments, business interests and digital assets.

Everyone has a tax-free IHT allowance, known as the nil rate band, which is currently £325,000. If your estate exceeds that threshold, IHT may be charged at 40% on the value above it.

Due to the spousal exemption, there is usually no IHT payable when you leave assets to your spouse (husband or wife) or civil partner.

It is important to note that the spousal exemption does not apply to unmarried couples, even if you have been living together for a long time.

The rules are different if you or your spouse is not UK resident.

When assets are left to a spouse/ civil partner on the first death, the unused allowance of the first to die can be transferred over. This means that on the second death, the estate benefits from the combined nil rate bands of up to £650,000.

Additionally, if the Residence Nil Rate Band can be claimed, usually, this can also be transferred over. This means a married couple could have up to £1,000,000 worth of tax-free allowances.

The Residence Nil Rate Band (RNRB) is an additional allowance against IHT that can be claimed of up to £175,000 per person. It only applies if you leave your residential property to a lineal descendant (children, grandchildren, etc.). The legislation around the RNRB is complex, and the relief is gradually withdrawn for estates over £2,000,000. There are provisions for downsizing that enable your Executors to make a claim for the RNRB should you sell your home and buy a cheaper home before your death, or if your property is sold before your passing.

You will not pay IHT on lifetime gifts unless you die within 7 years of the gift. You must also not benefit from the asset after the gift has been made.

Sometimes, gifts made up to 14 years before your death can become chargeable when you die.

Different rules apply to gifts that you make to trusts. Gifts to trusts can incur an immediate lifetime charge to IHT.

Several exemptions and reliefs against IHT apply to gifts. You can reduce your IHT liability by using any allowances and exemptions.

The rules around gifting are complex. Most people do not realise that the recipient of the gift becomes liable for the tax, if a gift becomes chargeable because of your death.

You must seek professional advice before embarking upon your gifting journey. This will ensure that there are no adverse consequences or unintended tax liabilities.

Business Relief and Agricultural Relief are exemptions to IHT for qualifying assets.
Significant changes were made to Business Relief and Agricultural Relief for deaths that occur on or after 6 April 2026. The changes introduced a cap to the 100% qualifying exemption of £2,500,000.

The reliefs are still highly valuable.

If you have business or agricultural assets, we strongly recommend seeking professional legal advice.

Care Fees

Alzheimer’s Disease International reports that in 2020, there were over 55 million people living with dementia. One person develops dementia every 3 seconds.

Advances in medicine mean people are living longer. Yet, whilst benefiting from longevity, people are suffering from complex care needs, resulting in them requiring residential or specialist care.

As such, people are concerned about what happens to their home and money if they need care.

With the average cost of residential and specialist care ranging from £1,300 to £2,000 per week, families must consider their options for limiting the impact of care fees.

Under current rules, if your assets exceed the capital allowance and you do not qualify for NHS Continuing Health Care (NHS CHC), you will be required to fund your own care.

We can advise on the most appropriate strategies to help protect against care fee costs. This includes planning incorporated into your Will, or lifetime gifting and trust arrangements. All planning is tailored to your personal circumstances.

FAQ’s

The capital allowance is £23,250. If you have assets above this, you are required to pay for your own care costs.

Yes, in most cases, your home would need to be sold to pay for your care. There are limited circumstances when your home will be disregarded for the Local Authority’s financial assessment.

The well-known ‘seven-year rule’ for gifting applies to Inheritance Tax, not care fees. The Local Authority can look back indefinitely when carrying out a financial assessment.

If you have deliberately deprived yourself of assets to avoid paying for your care, the Local Authority can treat it as if you still own the gifted assets. Those assets are then included within the Local Authority’s financial assessment.

With careful planning, families can put provisions in place to reduce their exposure to care fees.
Common planning includes updating Wills, putting assets in trust, separating assets between couples, and purchasing annuities.

Contact C.K. Law today

When it comes to care fees, planning is essential.

We can recommend the right approach based on your individual needs, family circumstances and long-term goals.

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If you would like to talk about your succession and estate planning needs, please get in touch