If you don’t make a Will before you die, your estate will be shared out according to the intestacy laws instead of according to your wishes.
A final salary pension will usually stop paying an income when you die, unless the scheme also provides a pension for your widow or widower. However, a defined contribution pension can be passed on to your beneficiaries. If you die before the age of 75 the pension will be passed on tax-free. If you die after 75, your beneficiaries will pay their usual rate of Income Tax on any money taken from the pension.
A pension sharing order is often set up during a divorce. One ex-spouse is awarded a portion of the other spouse’s pension, in order to equalise in retirement the assets that were built up during marriage.
Pension offsetting is an option for splitting a couple’s assets during divorce. Each ex-spouse keeps their pension, but these are offset against other assets to ensure an equal overall split. However, reaching a fair split can be challenging as some assets are difficult to value accurately and others may change value at different rates.
In some cases the NHS may fully fund your care – this is called NHS Continuing Healthcare. The NHS will carry out an assessment to decide whether you are eligible for support. If you aren’t eligible, you may still receive support if you need nursing care and are in a care home that offers it. This is known as Funded Nursing Care (FNC) or the Registered Nursing Care Contribution (RNCC).
If you don’t qualify for NHS support, your local authority may provide funding depending on how much money you have. However, generally if you have more than a set level you will not receive financial support (although the rules vary slightly across the UK).
You could also get a weekly amount from the Government to help with personal care fees if you are aged over 65 and mentally or physically disabled. This is called the Attendance Allowance.
When you are applying for local authority funding for care fees, your local authorities will look at your overall financial situation to determine how much support you could receive. They will carry out a means test on your regular income from sources such as pensions, and capital – this includes your savings, investments and potentially your home. If your level of capital is over a set amount you will not usually receive any support from your local authority.
Many people lose the capacity or the desire to make important financial and lifestyle decisions as they get older. A Lasting Power of Attorney (LPA) authorises someone you trust (your attorney) to help you make these decisions, or to make them on your behalf.
There are two types of LPA. A health and welfare LPA allows your attorney to make decisions about your daily routine (such as washing and eating), medical care, moving into a care home and life-sustaining treatment.
A property and financial affairs LPA allows your attorney to manage your bank account, pay bills, collect your pension or benefits, sell your home and sign contracts on your behalf. This type of LPA is similar to an Enduring Power of Attorney – these were phased out in October 2007.
Income Tax is tax you pay on income from sources such as employment or a pension. Most people have a tax-free personal allowance for income – this is currently £12,570. Basic-rate tax is then charged at 20% on income between £12,571 and £50,270. Higher-rate tax is charged at 40% on income between £50,271 and £150,000, and additional-rate tax is charged at 45% on income over £150,000.
In Scotland there are five different bands for Income Tax ranging from 19% to 46%.
Capital Gains Tax is a tax charged on profit when you sell or ‘dispose of’ an asset that has increased in value. Disposing of an asset can include giving it away as a gift or swapping it for something else.
There is a tax free annual allowance, £12,300 for individual and £6,150 for trusts. Certain businesses may also qualify for some ‘relief’. Any Capital Gains tax charge will depend on your status e.g. individual (higher or basic rate taxpayer), trust or business and the type of asset sold/disposed of e.g. residential property or other chargeable asset.
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