The High Court has overturned a decision by the Special Tax Commissioner, who had determined that the taxman had unnecessarily cut the value of a gift made by a 90-year-old woman into a Discounted Gift Trust. You may be aware that this is a mechanism whereby a donor can seek to pass on money while minimising exposure to inheritance tax. By backing the taxman's decision, the courts are helping the government taxing families on money they have built up through their own efforts.

The details of the case are not at issue and in any event there could well be an appeal, so the “fat lady has not sung” yet.

My main issue is that this is another example of how the elderly are treated in this country, because the argument raised by the taxman is not so much one of principle but relates to the individual’s age.

How the elderly are treated
Anyone with elderly parents will know that the system is stacked against them. The NHS does the minimum possible to secure their health, once they are past their mid-80s and makes every effort to discharge them from hospital following an accident or illness on the assumption that a family member will be available to look after them.,

What they forget is that many people of that age will have children in their 50s and 60s (who may not be in particularly good health themselves). In any event, they could live many miles away.

The cost of care
The problem is, of course, that with nursing homes costing more than £100 a day in many parts of the country, keeping the elderly in care for any length of time can be costly. ‘Permanent’ tenure could cost £36,000 a year or more and that is without nursing care. Mind you, there is help from the government with the basic state pension for an individual at £82.05 a week!

This means that the balance of care costs have to be paid from personal savings, if there are any, because state provision (which can often be in precisely the same home as private care takes place) is means tests. The message is clear; save for your retirement and you are on your own – rely on the state and you are looked after.

Most of us, however, prefer to be financially independent of the state as far as we can. This means that we will build up our investments while we can and then rely on them to provide for later in life.

With life expectancy increasing all the time, it is important to ensure that you have sufficient money to pay for a long (and largely healthy and active) retirement; relying on state help is useless.

Tax the elderly out of existence
One way the government could help the elderly would be by making monies paid for long term care fully tax deductible. Currently, certain types of annuity paid directly to a care facility are free of income tax on the annuitant (although if the money is paid to the annuitant for any reason, it then becomes taxable on other than the capital element).

However, care fees are normally paid out of taxed earnings and savings. The government could make a massive difference to many families by making all money paid to a care home recoverable against personal tax … instead of wasting time finding extra ways to squeeze every last penny out of families/

If you are wondering what to do, about your investments and retirement planning contact Robert Bruce Associates for individual assistance.