Just the two of us: estate planning for both of you

 09 February 2021
Just the two of us: estate planning for both of you

Over the last few weeks as the UK vaccination programme has rolled out, we’ve all become much more aware of the number of people aged 65 and over. According to the government’s figures, the total number of people aged over 65 and those in care homes (with some overlap) is 12.8million people.

According to the ONS, of those aged 80+ who are or were married, 23,000 women did not have children. They further estimate that by 2045 when the 1960s baby boomer reach the age of 80, the number of childless women will rise to 66,000. (The figures are about the same for men.)

No inheritance to pass on

The practical upshot of this for estate planning is that many senior couples have no children to leave an inheritance to - but equally, no children to potentially take care of them in old age either. That’s why estate planning for couples should include long-term provision for both of you as a couple for the years ahead, and potentially as a widow/widower further into the future. 

This becomes particularly important when one spouse/partner requires a higher level of long-term care than the other. As our previous article “Long-term care: financial assessment and future planning” explained, if you need funding for your care from your local council, you will be means tested. 

This will be based on your own assets, including your 50% share of any joint assets. This doesn’t include the family home if you or your spouse will continue living there. Equally, assets ‘ring-fenced’ in trusts, etc, for relatives or children from another marriage, for example, may also be excluded if structured correctly. (This would depend on the trust and how/when it was set up.) 

Are your assets balanced?

Many couples have a variety of assets in their own names, and they may not be balanced equally between them for various historical reasons. In the initial stages of providing care for one spouse, this probably won’t matter too much if that home care is self-funded and affordable. However, if the level of care required suddenly increases, so will the costs. At this point, assets may need to be looked at more closely to offer more funding options, including means-tested council care.  

Prepare for the unexpected

Often it is apparent which spouse is going to need the care, but the unexpected can also happen, and the partner who is not receiving care may pass away. In this case, monies would (usually) pass to the surviving spouse (depending on the stipulations of their Will), and be used for their care. Whilst IHT won’t be due on estates that pass from spouse to spouse, the amount inherited will likely push the assets of the surviving spouse up and over that council savings threshold.

Household running costs

The important point to remember that if you are living in and running a house, the everyday bills don’t decrease just because one spouse is receiving care. Often it’s the opposite, with utility costs increasing due to extra heating, the need for adapted vehicles, special dietary requirements, funding home adaptations, employing extra non-care help such as gardeners or drivers, etc. 

What is more, these costs will still apply if one spouse goes into long-term residential care and the other stays in the family home. Plus, you need to include in your estate planning ensuring access to ‘liquid cash’ for emergencies and repairs, on top of your normal outgoings.

How much does everyday living cost?

At Panthera Estate Planning, we recommend that every couple sit down and work out what their ‘normal’ annual expenditure is, including every aspect of running their household, before they come and see us. It can be quite an eyeopener too, when all those ‘little extras’ such as takeaway coffees, impulse internet buys, meals out, and long-forgotten insurance policies and TV subscriptions come to light!

This way, when we look together at how to ’sweat the assets’ to provide a stable income, we already know what the baseline costs are, and how they are likely to increase or decrease in retirement. We can also look at what your outgoings will be in the event of either going into care or in the event of the first one dying.

Planning for pensions

Another point to bear in mind is that one spouse may have a substantial pension, and the other a much smaller one. Pensions can and usually will provide a widow/widower pension, but (and it’s a big but) often at a much reduced rate of around 50% or less. So, the surviving spouse’s income might drop considerably on the death of their partner, even if they inherit their assets. 

Again this is where smart estate planning comes into play. At Panthera Estate Planning, we take a holistic overview of all your assets as a couple, and work out how to make them work best for you in your retirement through a detailed estate planning process. 

The importance of flexible planning

Your estate planning provision at point of retirement is only the first of several estate plans, however. As you age, or when major changes happen in your life, you’ll need to adjust your estate planning to accommodate those changes. Life is not predictable, so your estate planning needs to be flexible. At Panthera Estate Planning, many of our clients have been with us for years, and come back for regular reviews and ‘tweaks’ to their estate planning as required.

This series of regular reviews has a key benefit too for their future. When the need comes for major changes, we find clients who have already made smaller changes with our advice are more prepared. They have a good understanding of what their estate consists of, so when changes need to be made to how their lifestyle is funded, they are already aware of what they have, and what might need to be done.

Estate planning for life

If you would like help with your estate planning at any stage of life, and at any age, call us. We’ll help you assess what you have, understand what you want, and how to achieve your retirement and long-term care goals. You can:

Looking ahead

In our third article on long-term care, we’ll look at what happens if the money starts to run low, and talk about that most delicate of retirement questions, equity release!

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