CoinsQ: I have a lot of money in Cash ISAs. I’ve heard that when I die the amount my wife gets from these will be taxed. Is that right?
A: Money in a Cash ISA is exempt from all tax but that exemption dies with you. So unless your wife reinvested the money in an ISA or any other tax-free investment, any future interest it earns for her may be subject to income tax.
Q: I receive a pension from the Prudential and I once read that the company planned a pay-out to customers because it has such a large surplus. Is that correct?
A: Yes, it considered sharing out its “inherited estate” – reserves built up over the decades – but the company has since decided to keep the money to fund its business. The money would have gone to savers who had “with-profits” policies or pension plans. But as you are already drawing your pension, you would not have qualified anyway.
Q: I’m worried that we might lose our home if my husband or I had to go into care. Does it make any difference whether our home is owned jointly or as tenants-in-common?
A: No, because under present rules your home won’t be taken into consideration for care home fees if your spouse is still living there. It gets more complicated if your home is sold because the value of your share could then be taken into account in assessing your care fees. However, Government guidance says that, where necessary, residents should be able to use part of their share of the sale proceeds to enable their spouse to buy a more suitable property. Note that there are potential benefits for tenants-in-common arising on the death of the first person. These are best explored with a qualified adviser.
(Click here for Saga Care Funding Advice Service's free guide to paying for care, which includes some helpful factsheets and a helpline: 0800 056 7997.)
Q: My husband died just before he intended changing his will. Is it true that we could still alter it to match his wishes?
A: Yes. If all the beneficiaries agree, a will can be altered up to two years after death by what’s called a Deed of Variation. This is normally done where it will reduce the tax bill on the estate, for inheritance tax, for example. Your solicitor will explain how it works.
Q: Is it necessary to buy an annual travel policy when you book your holiday? We’ve just booked one but won’t be going away for another six months.
A: You may regret it if you don’t start the policy right away. One of the most important features of such policies is providing cover in case you have to cancel because of unforeseen circumstances such as ill health, redundancy, accident, or a death in the family.
Q: Can you explain to me why I did not receive the Winter Fuel Payment last Christmas? I am 80 years old and thought I would be entitled to it.
A: That does seem very odd. I’m afraid, however, that the deadline for claims for last winter has already passed. But I suggest you call the Government’s Winter Fuel Payments hotline – 08459 151515 – to find out why you didn’t get it and to ensure that you do receive it next winter.
Q: I have just inherited £100,000 from my late brother’s estate. As I have never had such a large amount of money before, I hope you can advise me on what I should do with it. I’m a 75-year-old widow and my present income is £15,000, most of which is tax-free because I get the higher age allowance, currently £9,640. But I’m not sure whether to invest it in case it takes my income above £22,900, where I would lose the age allowance.
A: You have no need to worry about losing your age allowance. The highest return you can get on deposit these days is about 5% before tax. So even investing £100,000 would not increase your yearly income by more than £5,000. The age allowance does not disappear at the £22,900 level. It is reduced by £2 for every £1 of yearly income you receive above that. You still receive some benefit from it until your income exceeds £29,230, at which point you would then be entitled only to the ordinary personal allowance, currently £6,475. I would advise you to invest at least some of your unexpected windfall into tax-free investments, such as ISAs, as the income from these is disregarded.
Q: I inherited shares from my mother some years ago. If I sell them now can their value when I was given them be deducted from the sale price for capital gains tax purposes?
A: Yes. Tax is based on how much the value has increased since you received the shares.
Written by John Husband, this article was first published in the June 2010 issue of Saga Magazine. John's opinions are his own and for general information only. Always seek independent, professional, financial advice.
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