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 dementia patients being diagnosed by 2015.

Doctors have reacted with caution to the scheme, with the British Medical Association saying 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 people, known as attorneys, the power to make decisions about their finances and/or their health and well-being once they no longer have the capacity to do so themselves – it offers little scope for estate planning once activated.

Lee McClellan, a partner in Palmers’ Wills, Trusts and Probate department, said: “A will or LPA can only be made when someone is of sound mind, underlining the importance of putting financial affairs in order at the earliest stage.

“A diagnosis of dementia or other debilitating condition may never happen, but making your wishes known well in advance provides a valuable safety net and reassurance for you and your loved ones.

“Whilst there may be some inheritance tax planning strategies that can be followed even once a person has lost the capacity to handle their own financial affairs, the options certainly decrease at that point. If you face a potential IHT liability then it makes sense to consider – with the assistance of expert advice – what steps can be taken to mitigate the same at the earliest opportunity.”

For more information about wills, LPAs or inheritance tax planning, please contact our Wills and Probate department on 01268 240000.