Care ISAs: Are they worth the investment?

With the proposal of Care ISAs being introduced we look at what they are and whether you should consider getting one in place.

The Government will give much more detailed information as to the Care ISA in the Autumn when their social care proposals are outlined but for now we know that the Care ISA is one proposal in the Government’s plans to get individuals thinking about, and saving for, the costs of their future care at a much earlier stage.

One of the benefits proposed with the new Care ISA is an exemption from Inheritance Tax for any funds left in the ISA at the time of death. However, with the ever increasing cost of care, this is likely to benefit only the very wealthy, who can afford to put large sums into the Care ISA to ensure that it is not all used up by care costs during their lifetime allowing a lump sum to be paid to their beneficiaries free from any Inheritance Tax.

It is also worth considering whether the Care ISA is different or any more advantageous to other pensions, investments or Trusts, that are already available and do not attract Inheritance Tax.

The Care ISA, although seemingly a great idea to provide savings for care in later life, may just be seen as yet another expense that is a luxury rather than a necessity for most. When reaching the age where going into care is a necessary consideration, it is likely to be too late to begin a Care ISA and those with time on their side, to consider saving for care in their future, are likely to consider savings for or paying off education, getting on to the property ladder and starting a family a more important and necessary expense, followed by private pensions and then possibly a Care ISA much further down their list of priorities.

Latest figures show that just one in twenty estates attract Inheritance Tax and so it is unlikely that the Care ISA will be of great benefit to the large majority when considering tax planning and planning for theirs and their families’ future and much less likely to achieve the Government’s aim of enticing us all to save more for the costs of future care.

With more information due in Autumn on the Care ISAs, we will consider the benefit of Care ISAs again later in the year.

If you would like to have a free chat about your Inheritance Tax liability and planning for the future, please contact us on info@TotalLegacyCare.co.uk or 01727 865 121

Leah Waller

Should I have a Lasting Power of Attorney in place to protect my business?

None of us want to put our loved ones, and those we trust implicitly, in difficult and onerous situations but sometimes this is unavoidable.

There may be circumstances in which you are unable to make commercial decisions and if that should happen, have you considered what would happen to your business?

As a business owner, being unable to make decisions for your business could happen in any of the following circumstances (some being a lot more common than expected!):

HOLIDAY: if you are on holiday and uncontactable (this may seem unlikely with today’s technology although not beyond the realms of possibility with exotic and remote locations becoming far more accessible, and retreats and social detoxes becoming more popular) or even if you are stranded abroad and not able to make contact with people at your business;

ACCIDENT: if you are involved in an accident that leaves you unable to communicate decisions, attend the business or results in a temporary, or even permanent, loss in capacity;

SHORT TERM ILLNESS: if you unexpectedly fall ill that leads to the short term loss of capacity, leaving you unable to make or communicate decisions, or an illness that prevents you from communicating decisions or working on your business in the usual way;

LONG TERM ILLNESS: should the worst happen and you fall ill with a long term illness resulting in the complete loss of capacity, resulting in you being unable to make any decisions in relation to either your personal or business finances and no prospect of this improving or changing.

If the above should occur, who on your business could carry out the following:

have the authority to make legally binding decisions
prevent the freezing/closure of business bank accounts
access bank accounts
pay your staff
pay suppliers
sign cheques
authorise bank payments and transfers
arrange insurance renewals
continue with Service Level Agreements
enter into contracts
invest assets

A family member, spouse or partner may not always have the power to step in and carry out your duties if you are unable to and having this uncertainty makes planning near on impossible and exposes your business to unnecessary risk.

How will a Business/Commercial Lasting Power of Attorney help you and your business?

This will very much depend on how your business is set up, whether that be a Limited Company, Partnership or of you are a Sole Trader.

If you have a Limited Company, much of your business affairs will be dictated by the Articles of Association that we’re adopted upon incorporation of your business. These Articles may well provide for circumstances in which a Director loses capacity and termination of their appointment. However, if you are a sole Director then an Article terminating your appointment upon loss of capacity would not be appropriate as this would leave your business with no Director. A Lasting Power of Attorney will then ensure continuity of the business should you lose capacity and be unable to act.

If you are unsure what the Articles of Association for your business provide for, and whether they are right for your business then our specialist, Leah Waller, can help you – Leah@TotalLegacyCare.co.uk.

If your business is set up as a Partnership, then the Partnership Agreement between yourself and the other Partners should have provision for the loss of capacity by a Partner and this may well be sufficient to cover your business should you lose capacity. If you have any doubts or are unsure whether, or how, your Partnership Agreement covers this then it may be appropriate to consider a Lasting Power of Attorney.

If you are a Sole Trader, then you are unlikely to have any documentation that sets out, or provides for circumstances in which you lose capacity as you, in essence, are the business and this is not a separate legal entity from you as an individual.

In such circumstances, a Lasting Power of Attorney to cover your business is an important consideration to ensure certainty and prevent risk and disputing should you lose capacity.

So, what if I don’t have a Lasting Power of Attorney in place that covers my business? In some circumstances it won’t be possible for someone to step in and act for you, in relation to your business, and if this should happen it may be necessary for an application to be made to the Court of Protection in order that a Deputy can be appointed to act for you.

You will have no say in who the Court of Protection appoints as your Deputy and this you cannot guarantee that this will be someone that you would have chosen if you had the power to do so. The Court of Protection process can take longer than six months to complete and be expensive, leaving your business – and your staff and clients – vulnerable and without direction at a time that is already extremely difficult due to your, often unexpected, absence.

If you haven’t already got a Lasting Power of Attorney in place for your personal finances, then you may want to have one Lasting Power of Attorney created to cover both your personal financial affairs and your business interests and assets. However, you may not want, or expect, the same people dealing with your personal finances to deal with your business; they may not be the best placed person to do so or the burden may simply be too much.

You can therefore make more than one Lasting Power of Attorney, one to cover your personal financial affairs and another to take account of your business, giving you the control to ensure that both are protected and in the hands of those you trust. This will also ensure certainty and clarity for your Attorneys so that they are clear on their responsibilities.

A Lasting Power of Attorney for your business should be an important consideration when succession planning and setting out your business plan to limit disruption to your business, relieve those closest to you of the burden that comes with uncertainty and the possibility of making a Court of Protection application and avoid delays.

If you would like to discuss putting a Lasting Power of Attorney in place to protect your business, call us on 01727 865 121 or email us at info@TotalLegacyCare.co.uk for a free discussion on how we can help

Leah Waller

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Category: Lasting Power of Attorney