Dementia scheme raises estate planning fears

An NHS scheme offering a £55 payment to GPs for each patient they diagnose with dementia could have significant implications for people who have yet to make plans for their financial future.

NHS England has set aside a £5 million pot to fund the payments to GP practices for each new patient diagnosed with dementia by 31 March next year, as part of a drive to achieve an NHS target of two-thirds of patients with dementia being diagnosed by 2015.

Doctors have reacted with caution to the scheme, with the British Medical Association saying on 22 October that GPs did not need a financial incentive to do something they were already doing and that the money would be better spent supporting practices to care for dementia patients.

Now financial advisers have warned that a diagnosis of dementia could make general financial planning and estate planning more challenging, including in relation to inheritance tax (IHT) which is levied at 40 per cent on estates valued at £325,000 or more. In addition to the various available IHT reliefs and allowances, certain gifts are exempt from IHT, while more substantial assets given away will not be taken out of the estate, unless the person making the gift then survives for a further seven years.

They say financial decisions or a will made in the run-up to a dementia diagnosis could be left open to challenge and that even if someone has made a Lasting Power of Attorney (LPA) – which gives a trusted person or persons, known as an attorney, the power to make decisions about their finances and/or their health and well-being once they no longer have capacity to do so themselves – it offers little scope for estate planning once activated.

Stephen Berry, personal finance specialist at insurer NFU told the Telegraph on 2 November: “Most people are completely unaware that estate planning becomes almost impossible once an attorney takes over. This is to prevent any attempts to siphon off money to favour the attorney’s children or family over others.

“The threat of higher numbers of dementia diagnoses should spur people on to think about giving away assets earlier than they might otherwise have done, to avoid big IHT (inheritance tax) bills later on.”

Lee McClellan, a partner in Palmers’ Wills, LPAs or inheritance tax planning, please contact our Wills and Probate department.”