Can someone explain the "death tax"?

[WeLoveTheMoon]

Just that really. I dont understand it? Dp is so far left he would tell me the conservatives were bad even if they were giving us a puppy so I cant ask him.

Thank you

[WeLoveTheMoon]

Anyone?

[ImpYCelyn]

Do you mean the new one about care if your are ill in old age?

As I understand it, if/when you go into a home they will start billing you, although they won't make you sell your house while your or partner are still alive. When you die, they will subtract what you owe from your estate, until you have 100,000 left, which they can't touch. If your bill is for everything except that 100,000 that is all your heirs will inherit (and they'll have to settle anything else you've left behind, e.g. funeral costs from that). So if your house is currently valued at 550,000 (pulled out of the air) and you were expecting your DCs to split that between them, but you get dementia and end up with a huge care bill, they will only get what's left after your debt is paid. Yours and DPs. And it's a joint figure I believe, not 100,000 each.

If however you and your DP die suddenly from heart attacks aged 82 there will be no care bill and your DC will inherit everything. So some people are interpreting it as a tax on dying slowly...

[ImpYCelyn]

Sorry, my 'you' is autocorrecting to 'your'...

[ImpYCelyn]

Also they will aggressively chase the money if it looks like you divested assets to avoid a care bill, so signing over your house to your children, or giving them big lump sums. There's a window which is too close to going into a care home, and they will claw it back and make your children pay it. That happens now anyway.

It used to only apply if you went into a residential home, so you could avoid it by staying at home and having carers doing home visits. But you will now be charged for that too.

[ImpYCelyn]

If you don't have assets worth £100,000 you won't have to pay anything. Which is why people are calling it a tax.

Sorry for the many posts, I kept remembering bits.

[Judashascomeintosomemoney]

So, Imp, say my house is worth GBP600,000.00. I own it jointly with my DH. So his estate, regarding the house, is GBP300,000.00, because I own half and he owns half, right? So if he goes in to care surely they can only 'take' GBP200,000.00? And if I then died, needing no care, I could leave my DDs GBP400,000.00. Or am I missing something?

[ImpYCelyn]

For the purposes of this, you both own a house worth £600,000. So if DH goes into care, they will bill up to £500,000. It won't be payable until the death of both of you, they won't take the house while you're living in it, but then it will come out of the estate. At least, that is how it appears from what they're saying. Because if as a couple you owned a house worth £105,000 you'd be liable, so not considered to own £52,500 worth of house each. It's a joint asset worth £600,000, not an individual 50%. Like with inheritance tax, you double up the allowance for a couple. Spouse gets everything without IHT as it's a joint asset, and then you share the allocation when passing it on after the survivor. You share the allocation here as well.

[WeLoveTheMoon]

Okay ...I think I get it.

There seems to be a huge outrage about it and I didnt understand it haha. Thank you.
Im not sure what I think about it in all honesty

[HappydaysArehere]

Can anyone explain what happens when the one needing care dies and the other continues to live in the house. Does the original debt continue to attract interest? In which case the amount payable could be huge if the remaining partner lives say 20 years. Also that would be a charge on the partner who didn't need care.

[BelleTheSheepdog]

Some people are currently paying for care though and they are only allowed to keep just over £23,000 in assets.

As I understand it the proposed scheme would extend it to those with dementia who don't currently pay?

[ImpYCelyn]

Belle you're right that at the moment the limit is £23,000, however that excludes your house. It's is not considered an asset for care liability. So it's £23,000 in cash. The £100,000 includes your house, which means many, many more people will be liable, as lots of homeowners have a house worth more than that, but not necessarily large cash savings. Currently they are still leaving the value of their house to their heirs, this will now be eaten up.

The scheme extends to all those who need care who don't currently pay, if they have over £100,000 in assets, including house and savings. But it's likely that those with long term, slow conditions, like dementia, will end up with much higher bills.

Happy I'm not sure, I believe local authorities have freedom when managing these schemes, so it's possible that they could run a scheme where interest continues to be run up on the debt. They could argue that you have the option to sell immediately and pay up front, rather than delaying and accruing interest... but yes, if there is interest added the debts could be massive.

It is perceived to be a shared expense, like most household expenses. If your partner won't pay for your care who will? (Rhetorical. Surely that's what we pay NI for. But apparently not.)

[cdtaylornats]

Surely that's what we pay NI for

No partly because NI has been playing catch-up since day 1. All of the things NI was going to pay for were paid out as it was started.

[HappydaysArehere]

Well my family will really need anything we can leave and I don't want a life dependant on others to see to my personal needs. I am prepared to see myself out. After all what use will I be. At least if I could have helped them after death there was an added value to my life. We worked so hard to scrape together what we have and I am not prepared to let some Council/Government scoop it all up because I was unlucky enough to contract a cruel discease. Don't forget the £100,000 includes all the possessions in your home plus funeral expenses if not prepaid. You just try selling old furniture and see what you get! I am not being unduly pessimistic as my mother died from this wicked, ghastly discease.

[ImpYCelyn]

Sadly Happy I don't think you're alone in thinking like that. What a terrible pressure to have put on the vulnerable

And not necessarily the elderly either. This is for all care home use. Including younger people who need caring for

[ImpYCelyn]

Very sorry to hear about your mum

[HappydaysArehere]

Thank you Imp. The devil is always in the detail so we will be voting in the dark.