Jackie Hall

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Jackie Hall

Partner

Funding care – will the proposed Care ISA solve the crisis?

It is understood that the Treasury is considering proposals for a new Care ISA which it hopes will encourage people to save for their future care costs. The encouragement to save comes in the form of an Inheritance Tax (IHT) exemption which would ensure that funds in the ISA are not subject to 40 per cent IHT on death.

Very few people set aside money specifically to cover their future care needs. Those with lower income and savings generally have other priorities and their estates would probably fall into the 95 per cent which are unlikely to pay any IHT anyway. An IHT exempt ISA is not going to encourage this group to save for their care, and in reality, it is this group which is most likely to need financial assistance in later life.

But it may encourage the other 4 per cent who might see this simply as a further means of planning to mitigate IHT. This latter group would have the means to pay for their own care in any case.

Under current rules anyone with savings over £23,250 (which does not include the value of your property unless you are going into a care home) is expected to pay the full cost of their residential care or care support at home. Nursing care is funded differently. So those who are most likely to be inclined to save in a Care ISA would most probably have funded their own care without the tax exemption. Those without the financial resource to save will still be disadvantaged.

Quite apart from the IHT break being useful mainly to those with the ability to fund their own care, there are also a number of practicalities to consider. Not least of these is to establish a reasonable level at which to cap the IHT exempt saving. It is proposed it will be capped at the cost of care, which is difficult to judge. Some individuals may require care for many years and whilst other perhaps just a few months. So, it would be impossible to know at the point of saving what these costs are likely to be.

The Care ISA does nothing to solve the care crisis but merely makes it easier for the wealthy to pass on more of their estate IHT free. What is needed is a system which ensures adequate quality care for everyone who is unable to fund it themselves.

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