SOCIAL care has become the key issue in the general election with obvious consequences for estate planning. This is not a political blog, and my concern is simply to report how the proposed changes will affect the public. Unfortunately the various party proposals are as clear as mud ...
Theresa May last night (May 22) appeared to perform the first u-turn of the campaign by pledging a cap on the cost of care just four days after she had ruled it out in the Conservative manifesto.
The prime minister then claimed, bizarrely, that nothing had changed. Clearly it had. The manifesto explicitly rejected a cap on social care on the grounds that it "benefited a small number of wealthy people".
Instead, Mrs May announced a £100,000 floor along with changes that would compel thousands to fund their care at home by making their property count towards the amount they had to pay.
The policy would mean that people would foot the bill for their own social care until they were down to their last £100K in assets — the cost to be taken from the sale of their estate after their deaths.
So if your house is worth £500K your estate would be liable for up to £400K in care costs.
The Institute for Fiscal Studies estimated that this would mean up to 17per cent of people in their 70s who currently have free domiciliary care would now have to pay for it.
The proposal has been dubbed a "dementia tax".
Yesterday Mrs May has said she would bring in an "absolute limit" to curb liabilities for care costs.
She did not say what the limit would be. That figure would be decided after the election following a consultation, she said.
It is estimated that this policy change will cost the state at least £2billion extra, partly paid for by strict means-testing for winter fuel payments.
It's better news for the elderly in residential care whose homes are already factored in to calculations of their assets. The proposed changes mean that they would only have to fund their care until they have remaining assets of £100K instead of £23,500 as is the case now.
So to summarise, under May's proposals people won't lose their homes while they are alive. Instead the cost of care would be charged after their deaths.
Labour leader Jeremy Corbyn has rejected this strategy, saying that under a Labour government social care would be "properly funded" by the state via a massive increase in taxation, including inheritance tax.
Labour advocate the creation of a National Care Service for England to be "built alongside the NHS". They would lay the foundations for this in their first term by increasing social care budgets by £8billion over the lifetime of the next Parliament, including an additional £1billion for the first year.
They pledge that this money would pay for "a real living wage" for carers and the implementation of the Ethical Care Charter "ending 15minute care visits" and providing care workers with "paid travel time, access to training and an option to choose regular hours".
But where would Labour's proposed social care budget come from?
The party's "death tax"proposal, set out in an appendix to the party's manifesto, means families would pay a 40 per cent tax rate on the value of a deceased relative's home if it is worth more than £425,000.
Corbyn's plan to reduce the inheritance tax threshold would immediately affect 3.9 million of the 25 million homes in England, according to Treasury Analysis.
A further one million households would be forced to pay the tax by 2022 because of rising house prices. That would take the total to 4.9 million properties, just under 20 per cent of households.
On the face of it, these are worrying developments. If as a result of May's plans you are unable to pass your home on to your children does it not still mean that effectively you lose your home?
While if your house is worth half a million now (a modest sum in London and the Home Counties), a Corbyn government would help themselves to a hefty £100K from the sale after you've gone. (This is not the right place to consider the implications for future prosperity if the public are forced to shoulder the burden of higher taxation.)
Clearly whichever party forms the next government, either the Conservatives or Labour in coalition with the Scottish National Party, it will have deep implications for you and your estate.
But don't panic. Estate planning is a specialist area and many experts are available to advise you of the best ways to ensure that everything you have worked for goes to your family and not the state. Indeed, as Teressa McDonald, head of legal services at Will Associates explains:
“Experienced estate planners know how to use today's proven financial frameworks to protect the things you've worked hard for all your life, no matter what changes come to be in relation to social care. We'll be watching and monitoring and advising our customers if changing their estate plans makes sense in lieu of the outcome of the general election. We're here to help you do the right thing for your family, no matter what."
Garry Bushell, May 2017