Q. I am 83. My neighbour has told me that she has given her house away to her son through a trust to protect it from being taken by the local authority if she goes into care. Is this a good idea?
A. Unfortunately, it is not quite as simple as that. The main problem is that it the rules state that if you have deliberately moved assets out of your name just to avoid the costs of care, the value of those assets can still be brought into account when the local authority decides how much it will contribute to the costs of care. Another issue is that as the house now belongs to your neighbour’s son, it is now at risk if he gets divorced, or is made bankrupt, or even just falls out with your neighbour.
“Asset Protection Trusts” are often sold (quite expensively) to people for the same reason. The reality is that this is a complex area, and there are certainly no guarantees. My advice would be to consult a specialist trust and estate solicitor for advice in this area. Look out for the “TEP” qualification, which indicates that they have demonstrated the higher level of expertise required by the Society of Trust and Estate Practitioners. Such a solicitor will give advice on the pros and cons of each course of action, and their advice is usually much better value than those promoting a particular trust arrangement which may not work anyway.
Q. I read your answer to the question last week where someone had inquired about insuring their income in the event of a long period of not being able to work through an accident or illness. This is something that had never occurred to me so I had a look through my contract of employment which I think must have not seen the light of day since I joined my employer over 15 years ago. It states that I would only be paid for 3 months if I have an accident or am off sick long term. I had never heard of Permanent Health Insurance (PHI) schemes. This is something I will certainly look into. Is this the sort of insurance cover that is widely taken out?
A. First of all unlike last weeks questioner who would be paid for 6 months by his employer if they were unable to work in the event of an accident or long term illness where I suggested he consider taking out a PHI scheme that was 26 weeks deferred in your case as you would only be paid for 3 months, therefore it may be more appropriate to consider a policy which has a deferment period of just 13 weeks. It would mean that you would have continuity of income until you either recovered enough to return to work or reached retirement. I have to say that this sort of insurance is not widely taken up by individuals for perhaps various reasons. Like you, I suspect a lot of people have just not thought about it. Some might think an accident or long term illness may never happen to them and some might just think it will be too expensive. Over the years we have advised a number of individuals to take out such schemes and we have had people who have made claims. A person earlier this year who is in their early forties is now on PHI benefit due to long term illness and the diagnosis is that he is unlikely to ever work again. In a recent survey only 4% of people have income protection! But as always, I would recommend you take advice from an Independent Financial Adviser before proceeding with anything.
Q. With the state of the NHS, do you think I should be considering private medical insurance? I do have a minor medical condition but I am concerned as to whether I will get the treatment I need with the Government seeking to save money.
A. Private medical insurance comes in many forms and for “fully comprehensive” it can be quite expensive. Some policies do not cover pre-existing conditions so in your circumstances you may not get the cover that you feel you want. Ultimately the NHS will be still there to cover the main issues that arise in people’s lives but private cover can help to speed up the process of treatment and to make care a little more comfortable. As always it is best to speak to an expert as there are a number of companies offering this type of cover.
If you have a question you would like Trevor to answer, please email it to: yourmoney@rwpfg.co.uk or post it to Your Money, Rutherford Wilkinson Ltd, Northumbria House, 21-23 Brenkley Way, Blezard Business Park, Newcastle upon Tyne, NE13 6DS.
0191 217 3340
