AIBU to think a 10% inheritance levy for social care is fairer?

[TourdeCrema]

So Andy Burnham is looking at a 10% death tax across the board instead of the system we now have, where social care may wipe out your entire inheritance and you don’t get a penny.

paying for everyone’s social care through the death tax

so if you leave £350k house and your parent had 5 years of care, you sell the house and pay £35k to the government and keep the remaining £315k.
presently you’d walk away with £0 as the social care would take the house cost

i think this is a much more reasonable suggestion, than walking away without a penny if my parent needed care( both my parents are dead, so it won’t affect me now)

They have fewer people in a contentious for profit sector. What is the point of introducing a social care tax if it is just lining the pockets of investors?

Sweden's for profit elderly care sector is every bit as much up for debate over whether it is fit for purpose as ours.

Broken is broken. Simply pouring more money into a broken system doesn't fix it.

Private equity isn't flocking to the care sector because it cares.

Generally I think this is fair - with one exception. ATM there is no tax for a wife or husband. If the surviving partner needs to find 5% of assets on the death of spouse, it could cause severe hardship. 5% assumes partners own all money equally, so 5% of everything owned. The house (usually the greatest asset) may have to be sold. Pensions are now part of the pot - what happens to spouses pension?

There would need to be an exemption for a spouse to inherit or the tax would need to be deferred until the second death. And any interest should be restricted to inflation, not the punitive rate HMRC use.

Not even spouses... anyone who is still living in the home that is due IHT.
I said upthread about someone who lived with her father, and she inherited the house when he died. She is on benefits and could not afford to pay 10% to stay in the home she has lived in for decades.

Yes, so why is that a problem?

Insurance schemes are good for spreading the risk of catastrophic costs, whatever the kind. Pay a premium, and you'll never have to find the money to rebuild your house from scratch if it burns down. Pay for private health insurance and/or pay NI and you'll never have to find the money to fund your own cancer treatments. Not having to pay either of those also leaves people with more money to pass on to their children, and yet we don't put a charge or whatever on their house or bank account to get payments back from their estate later.

If the stats are so definite about only a certain fraction of us ever needing significant amounts of nursing care, then insurance of some kind probably makes sense. So pay a fixed amount and you'll still have to pay quite a few costs (and always food and accommodation costs), but never the really catastrophic ones. Equally, it might turn out that you never would have had any costs, and just like those years and years of home and contents insurance premiums, all you'll have had out of it is peace of mind. Seems fair enough.

Surely the only thing that matters is whether the premiums are sufficient to cover the collective payouts. No idea if 10% like this would be enough. It would probably make sense for it to be on a sliding scale.

I would be really happy to pay something like that just as I'm happy to pay for house insurance. I'm also happy for IHT to come out of my estate.

Putting a certain percentage of my money into the common pot knowing others may well take more out of that than I ever will doesn't bother me. Putting ALL my money in while others (with similar financial resources to me) put nothing in - having my entire life savings and pension wiped out paying inflated fees at a nursing home because private patients are needed to subsidize non-private patients (and to help private equity firms make profits) - really would.

That's not sharing the cost (of caring for people with no savings) across the whole population, that's focusing it very directly on a small number of people who also happen to need care, and viewing their particular savings as available to spend for this 'common good', but not other people's savings. I'm not sure why that's fair.

Re the boomers and having to 'get them to pay' as someone said earlier - bear in mind that if you make sure boomers don't have much to leave to people then it's millennials you're punishing, not boomers. The boomers will be dead. Fair enough to take a good slice in IHT but gleefully wiping out the savings completely of one subset of the boomers who need care while leaving others with plenty to leave will only affect millennials.

The other thing no one's mentioned is the billions of pounds of unpaid care provided usually by women. Another side effect of fewer working age adults to fund things with tax is fewer working age adults to take time out of working for unpaid caring duties. With the best will in the world even families from cultures that pride themselves on doing all the caring themselves are going to find that harder in the future. Not sure what the answer is.

Search Assist

Elderly care in Sweden is largely funded by municipal taxes and government grants, with the user only paying a small fraction of the costs, typically around 4-6%. The system is designed to provide publicly subsidized services based on individual needs, ensuring universal coverage.

We definitely need to fund social care of the elderly to stop bed blocking if nothing else

and everyone paying is the fairest / at the moment it’s an advantage to stick the elderly in a home if the state foots the bill which it does for the majority where I live. Losing some inheritance might make it more likely they will be encouraged (by family and their own wishes) to stay in their own home especially if the own home care is better due to better funding.

People in care homes are molly coddled (or the home is criticised) so they live on and on. A miserable existence imv. In their own home they have some autonomy.
10% across the board is best. The poor pay something and the rich pay more.

People in care homes are molly coddled - @Corianda.

I've heard it all now. Do you actually know what mollycoddled means? It's always disapproving in its implication of excessive care and protection.

What more bracing and regime would you approve of?

I don’t think it’s right that the NHS is free at the point of use but social care is not.

My DF had a rare blood cancer. The cost of his medication was thousands per month. Added on to that weekly blood transfusions and several hospital stays over the two years of his illness. And then two weeks of hospice care at end of life. All of this was “free”, yet if he had dementia, Parkinson’s or similar, then he would have had to have paid. That doesn’t seem right.

I would happily pay 10% Social care levy to mitigate against having nothing to pass on to my children. Most of us accept the principle of socialised health care so why is socialised social care questionable?

Not allowing residents to walk outside or sit in the garden - they may fall
They can sit in bed, or in a chair in their room or ina chair in the day room
My brother who had spent his life out of doors was in this situation, I took him out but staff didn’t yet would take themselves outside for a fag

That's not mollycoddling; it's the staff cutting back the service for their own convenience. Possibly understaffed because of tightarse owners maximising their profits.

It's a lack of care.

@Americasfavouritefightingfrenchman- agree with this opinion and have witnessed more than once that dementia sufferers are wiped out of their funds whereas cancer sufferers are not. It's an awful but very unfair dilemma for later life.

There are two different things going on here. IHT and Care costs.

When it comes to care homes then most of us won't need them and even if we do, we are not likely to need them for long. There is however, the unlucky minority that need expensive care homes for a long period of time but does this mean that we all must retain all our assets and savings until the end of our life in case we are the unlucky few? That makes little sense to me as we don't all need to retain huge pots of money in case we crash our cars or our house burns down. We socialise the risk through insurance type schemes that make the whole system far more efficient and practical. This is obviously how social care should work. Your idea that you can't give anything to your children in life in case you need it when you're old and then obviously IHT comes and takes 40% away in death is clearly very unfair when other people choose to fritter their money away and get it all funded by the state without any recourse.

Inheritance is a different kettle of fish and many parents don't think it actually is materially to the costs associated with raising a child at all. Lots of parents continue to help adult children whether it's through funding further education, helping with a house deposit or offering free childcare. Some save money throughout their offspring's childhood to give to them when they become an adult to give them an advantage whereas they could have spent the money on private education and extra curricular hobbies when they were younger which also would have given them an advantage. People seem to have a problem with the former but accept the latter unquestioning when it's all the same thing.

Surely if the money and resource belongs to the parent then they should be entitled to spend or gift this in exactly the same way that they could spend money on luxuries for themselves if they didn't have children. I know a few older people without children that are enjoying very expensive holidays etc with the mantra 'you can't take it with you'. You might want them to preserve all their assets so that the government can tax them at the end of their life but nobody is under any obligation to do that. Taking 10% to cover care costs at the end of life seems reasonable but 40% to spend on whatever the state fancies simply because you died with assets is not.

When it comes to care homes then most of us won't need them and even if we do, we are not likely to need them for long.

many people need nursing care after hospital - its not available so it bed blocks and at peak times this is noticed and almost crashes hospitals every winter.

A critical lack of available care home beds and community care workers, leads to bed blocking.

The population is aging and will reach its peak in 2050, with 1 in 4 people being over 65. Once over 65 more hospital admissions are needed, so more bed blocking will happen - unless planning is now put in place 25 years prior

If money is raised through tax on death at 10% is would raise annually in the region of £600 billion in the next 25 years/ £24 billion per year and more care home spaces are available, this releases the pressure every winter on NHS

@OutOfTheOtherSide

it becomes a problem as the system isn't working.

I think there's a bit of a subconscious feeling that social care is not really as essential as medical, and should all be provided by the person or by family. Buying it in at all is seen as a kind of going private, so a luxury, not a need.

Also it's perhaps seen as worth giving people medical care because some of the people who get that might recover and be valuable, but social care has no such obvious reward for society.

Within that assumption about family is another, of course, that there's an army of middle-aged people, mainly women, out there, who should somehow be the ones dealing with all of this.

Well, dealing with it until they get too tired and old, at which point their reward will be for society to hope they die quickly without being too expensive, just when they'll probably really feel like they've earned a rest and deserve a bit of being looked after.

There are other ways we could recoup money from older people on the basis that otherwise all they'll do is selfishly pass it down to their children. We could start charging for GP appointments after a certain age, so they all get totted up and when the person dies a sum for that is taken out of their estate. We could increase council tax for them on the same basis, and get the money later.

If the important thing as some people see it is to make sure that all of us pay for as much as possible of what we use after a certain age, while we have any funds remaining, because otherwise we might leave money to adult children, then we might as well do that.

Or we could say that leaving money to children is as OK if you need social care as if you need medical care, and that pooling costs would be better.

It would mean sucking up the fact that a minority of rich old people who need a lot of care will then get to leave more money to their children than they would have done with the current system.

It's only the same amount they'd be leaving if all they'd needed was expensive medical care and not social care, though. It might feel less unpalatable if we remember that other rich old people, ones lucky enough not to need a lot of care, will then be paying more than they did before, and leaving less money to their children.

So what you are revealing are two aspects of delivery of the new system the Gvt will need to change to ensure it can recover the charge from eligible people.

If your friend is unable to get a mortgage, then the market has failed. And one policy solution is for Gvt to step in and create an gvt mortgage scheme to allow your friend to access a mortgage if they are refused elsewhere. Similar to student loans, so there is something of a precedence.

Ditto for equity release- she wouldn’t need to pay the mortgage over ten years, but a Gvt created scheme would enable people like your friend to pay what she owes and live in her house.

If she doesn’t like those options, then your friend is free to realise the necessary charge by selling her dad’s house she inherited and downsizing.

Your friend’s situation has been really interesting Xeno, hope it helps policy makers to think about all the possible scenarios and design the scheme so it recovers the money it needs to!

Your idea that you can't give anything to your children in life in case you need it when you're old

That wasn't my idea, you've made an error there. My 'idea' is that if you require care at the end of your life and you have funds to cover it, you should cover it. That's it.

If people want to spend all their money in life that's fine, if they want to send their kids to private school, great - carry on! Why shouldn't people spend money as they please? If you want to pass money down to your children then that's fine - but if you need it to pay for care then you need to pay for that care, not keep your money. That's bad luck, yes - but that's how it is.

So in your world what happens if all the parents (and everyone else) gives away all their money just before they need care? Then nobody has the funds to cover the costs and everyone is reliant on the state.

In the unlikely event that people could effectively time that then they'll be taxed appropriately. You can't just give large sums of money away.

But why not also if you need medical treatment at the end of your life and you have funds to cover it? Or the use of a fire engine, if you have funds?

Why must social care costs specifically stay individual and not shared?

In a shared costs system, you could potentially end up with the richest older people collectively paying more (and in return getting peace of mind), even if some individual ones pay less than they would do now. Would that be such a bad outcome?

You can. You just need to live more than 7 years afterwards. Why on earth can't a 30 year old gift large sums anyway for example? What moral obligation do they have to not do that?

I think some people believe that the costs for poor or even averagely wealthy people should be socialised with of course the wealthiest paying the most but they also think the rich should fund their own care separately. Literally double bubble and insanely unfair.

The 7-year rule is widely misunderstood, especially in relation to property - AND can be disregarded if there is suspicion that you gave away a large sum to avoid paying long-term care costs.

Even if you liquidated everything and somehow managed to parcel it out under the radar (in which case where would you live and what would you live on?) you'd be extremely unlikely to be able to predict exactly 7 years until you'd need care/die.

Again you are conflating two things.

The 7 year rule is relevant to IHT. It will not be disregarded even if you gave away your money specifically to avoid IHT or care costs assuming that you cover all the basics such as not retaining any benefit. You still will not be liable for IHT.

Deprivation of capital is relevant to care costs but it's complicated. The council has to prove that there was foreseeability and intention. If you reach 75, are in good health and choose to give away the majority of your assets then it might not be possible to prove deprivation of capital.