LTC

Question 1

Care Client - What additional info required before advising? (11)

Answer 1

1. Adaptions to home (costs)
2. Attendance Allowance?
3. ATR/Cap for loss?
4. Ability of family to assist financially with care?
5. Ability of family to assist with actual care?
6. Likely cost of Dom/Res care
7. LPA/EPA held?
8. Level of income required?
9. Life expectancy?
10. How client wants estate distributed on death?
11. Tax liability sale of invest?

Question 2

SJP Procedures on Care Client (9)

Answer 2

1. SJP Vulnerable/Special Care Procedures
2. Over 80 but under 85.
3. Encouraged to have 3rd party. Under 85 can refuse. ideally LPA
4. 3rd party copied into correspondence
5. Record 3rd party details
6. Investments within SJP Investment Corridor.
7. Investment Experience?
8. Vulnerable? Bereavment
9. Establish mental capacity

Question 3

Attendance Allowance (6)

Answer 3

1. Over 65
2. Severe Disability for over 6m
3. Higher - need care 24hrs
4. Lower - doesn’t need 24hr
5. Tax Free
6. Not means tested

Question 4

Outline the process that must be followed to set up LPA, including any conditions that must be satisfied.

Answer 4

1. They must have mental capacity.
2. They must use prescribed documentation/complete application form.
3. They must sign the documentation as the donor.
4. They must choose a certificate provider who must sign to confirm competency or else the LPAs cannot be set up.
5. All of the attorneys must sign to accept their responsibilities.
6. All signatures must be witnessed.
7. Instructions wish to include must be specified on the documentation/they should specify whether attorneys are to act on a joint or joint and several basis. - if one attorney dies - no need to cancelled if one attorney dies.
8. They must pay the application fee and register the LPAs.
9. LPAs should be registered immediately, ensuring attorneys can act under the financial decisions LPA now and the care decisions once the donor loses capacity.

Question 5

personal and financial factors selling her house and moving into children’s home. (11)

Answer 5

Personal factors

1. Provide certainty of her care/reassurance that help is on hand if needed.
2. If granny flat - retain some independence flat is separate from daughter’s.
3. She will lose some independence as she no longer owns her own property. Or if lives in daughter’s home.
4. Sold property so it is irreversible if it doesn’t work out/may be difficult to revert to living in her own property again if it doesn’t work out.
5. The move may place a strain on the relationship with daughter and her family.
6. Emotional upset of selling her home.

Financial factors

1. Loss of future growth in property prices.
2. Proceeds of sale are/aren’t required to provide income
3. If gifts house sale proceeds gifts they will be outside of her estate after seven years
4. It will save the ongoing maintenance and running costs of her current property.
5. Property proceeds subject to means testing in respect of long term care.

Question 6

Lose Mental Capacity with no LPA (4)

Answer 6

1. Finances and future health care needs would come under the jurisdiction of the Court of Protection.
2. A Deputy is appointed by the Court children/a close family member.
3. No financial transactions can take place and no care arrangements until appoint Deputy.
4. The Deputy unlikely to be granted powers to make the planned gifts that the ‘mother’ wishes to make, undertake any estate planning or make any end of life decisions.

Question 7

Ingenious Care Plan - why recommend (5)

Answer 7

1. Family History - so it is possible may need care in the future.
2. The plan is liquid/will provide funds to pay for care costs as Ingenious will provide funds within two weeks (to pay for care fees).
3. Ingenious provide help in selecting a suitable care package.
4. Funds outside estate after two years/benefits from BR and helps maximise estate passed to children.
5. Sufficient CFL to make this investment.

Question 8

Local Authority Assessment (4)

Answer 8

1. DLA disregarded.
2. The value of the home also disregarded as wife lives there.
3. The value of his FAD taken into account and treated as producing a notional income based on the maximum income that could be drawn under an annuity.
4. Any inheritance or savings fully assessable and as a result 1/2 of joint savings also taken into account.

Question 9

Describe in detail how the contribution made by the LA towards care costs will be determined.

Answer 9

1. Capital between £14,250 and £23,250 treated as notional income of £1 income p/w for every £250.
2. The notional income is added to other income plus AA.
3. The LA funds difference between care costs and his assessed income excluding the cost of NHS funded Nursing Care (RNCC).
4. He will be able to retain the Personal Expenses Allowance (PEA)/£24.90 per week.
5. The value of the family home is disregarded if spouse continues to live in it.

Question 10

Equity Release/Lifetime mortgages

Answer 10

1. There is substantial equity in the property/will it generate the income they require/amount of facility available based on their ages.
2. Costs/fees involved in setting up the facility.
3. They will retain full ownership of the property and Janet can continue to live in the family home enabling her to retain the support of her neighbours.
4. Withdrawals used to cover Janet’s living expenses (and spent) will not count towards the local authority assessment of Pierre’s capital/unspent withdrawals will affect Pierre’s entitlement to LA funding.
5. They will have the flexibility to access funds only when required.
6. Interest starts to roll up once withdrawals are taken which will reduce the equity in the property.
7. The reduction could be significant if Janet lives for a long time/takes large withdrawals and interest rates are high.
8. Rate of interest charged/interest rates charged on lifetime mortgages can be high.
9. Using a lifetime mortgage will reduce the estate available to the children on second death, however this also reduces the IHT liability on second death.

Question 11

Other than attendance allowance, outline the range of support Jack may be entitled to receive from the State including any conditions that would apply.

Answer 11

1. Medical assistance from the district nurse based on need/no conditions attaching.
2. Personal care plan from the LA but any care needs that result are only provided by the State if income/capital is below set amounts.
3. Minor adaptations grant/£1,000 based on need/ irrespective of wealth.
4. Disabled Facilities Grant/£30,000 subject to means testing.
5. Nursing care (unless already provided)

Question 12

Sell UT to buy INA - six potential benefits and six potential drawbacks of this course of action

Answer 12

Benefits
1, Higher level of income than is currently being received from these funds?
2. Income is guaranteed for life.
3. if index linked - will help cover the rising costs of the care.
4. Income tax free if paid to the commercial care provider.
5. Investing in INA reduces overall risk of portfolio bringing it more in line with his ATR.
6. Having the INA meet some of the care costs helps reduces the drain on the estate/using the UT funds to purchase an INA immediately reduces estate for IHT purposes.
7. The income cannot reduce if there is a fall in the market.

Drawbacks

1. The income produced won’t fully cover the additional costs of the care.
2. No longer have access to the capital/the income produced is inflexible.
3. If dies in the early years - benefit received will be less than the purchase price and net loss to the estate.
4. The INA cannot benefit from investment growth/if the funds had remained in the UT they may have benefited from investment growth.
5. Unlikely that the indexation included will fully cover the increases in care costs in future years.
6. Possible CGT liability when he sells his UT/there are costs involved in sale the sale of the UT/purchase of the INA.
7. If the market has fallen it may not be a good time to encash the unit trust.

Question 13

Explain why you would recommend that this sum should be withdrawn from the Building Society account, rather than from one of their other investments.

Answer 13

1. Funds in the building society are not subject to market timing risk.
2. There is no notice period required.
3. No tax liability will arise when accessing the funds.
4. No charges involved in accessing the funds.