John Husband

John Husband answers your personal finance questions

070307 - Inheritance Tax, care annuities

260207 - Contents insurance, shares, bills, mortgages

050107 - Inheritance Tax, NI contributions

051206 - Downsizing, second homes

301106 - Savings, house prices, care

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Ask the expert: John Husband

John Husband runs the Money Clinic for Saga Magazine and has been writing about business and personal finance for 40 years

He is also Personal Finance Editor of the Daily Mirror and has just won the Personal Finance Editor of the year award for the second time. He holds two Lifetime Awards for Achievement in Personal Finance Journalism.

He is a member of the Financial Services Authority's Treating Customers Fairly Consultative Committee, a trustee of the Mirror Group's pension scheme and a member of its Investment Committee.

Email John Husband your finance and money questions at web.editor@saga.co.uk

Q. I resent the idea of our hard-earned savings being swallowed up by Inheritance Tax. Are there any simple ways to avoid it?

A. Inheritance Tax kicks in on estates worth more than £285,000. But there are plenty of ways to mitigate it. The simplest is that anything given away seven years before you die is exempt - and you can take out a temporary life insurance policy written in trust to cover the bill if you die in the meantime. For more detailed advice consult an independent financial adviser.

Q. The boom in house prices means the value of our house could create an inheritance tax problem. Could we avoid that by gifting all or part of our home to our children?

A. It’s not such a good idea because unless your children charge you an economic rent for it the taxman will label it a Gift With Reservation of Benefit - GROB for short. He will treat as still your home. Worse, the children might also be charged Capital Gains Tax when they eventually sell it as it is not their home.

Q. Will we lose our home if either one of us has to go into care?

A. The value of your home is taken into account when assessing whether you have to pay for care. But it is ignored if one of the following is still living there
· your partner
· a child under 16 for whom you are responsible
· a relative who is either disabled or aged 60 or over.
The local authority also has some discretion. It can, for example, ignore it if a relative or friend under 60 who has been caring for you lives there.

Email John Husband your finance and money questions at web.editor@saga.co.uk

John will answer your questions in the Money section of the Saga Magazine website. Unfortunately he is unable to enter into personal correspondence with individuals. His answers represent his own opinions and are for general information only: you should always seek independent financial advice.

This article was created: 16 November 2006.
This article was last edited: 30 April 2007.

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