Inheritance & Trusts: What Family Carers Need to Know

Why this matters for carers

Two questions tend to land at once. First: does the person you care for have an up-to-date will? Second: if you're due to inherit from them, could that affect any means-tested benefits you rely on, like Carer's Allowance or Universal Credit? Both are easier to sort out before a crisis than during one.

Start with the will

Before tax or trusts matter at all, there needs to be a valid, up-to-date will. Old wills rarely account for a later diagnosis, a second marriage, or a carer's changed role in the family.

• Check whether a will exists, and roughly how old it is
• If capacity is already lost, a will can no longer be made or changed — not even by an LPA attorney
• A solicitor specialising in wills and probate is the right starting point

Inheritance tax, in plain terms

Most estates never pay Inheritance Tax (IHT) — but the numbers are worth knowing so nobody's caught by surprise.

Both thresholds are frozen until April 2031.

The first £325,000 of an estate is tax-free. Add a further £175,000 if a home passes to children or grandchildren — so a couple can often pass on up to £1 million tax-free between them. Above that, tax is 40%. Gifts made more than 7 years before death are usually outside the estate entirely; gifts made within 7 years are taxed on a sliding scale (32% down to 0%), only if they use up the Nil Rate Band.

Trusts — what they're actually for

A trust separates who owns an asset from who benefits from it. Two situations come up often for carers:

• Discretionary trusts — trustees decide how and when money is used, so a beneficiary on means-tested benefits doesn't lose entitlement by inheriting a lump sum directly
• Vulnerable beneficiary trusts — a named legal category for disabled or seriously ill beneficiaries, with better tax treatment. Worth raising by name with a solicitor

Deprivation of assets — the trap to know about

Councils can investigate if assets were given away specifically to reduce care fees. If they decide that was a significant reason, they can treat the person as still owning it ("notional capital") — leaving them self-funding care with no actual money.

• The 7-year rule doesn't apply here — that's an IHT rule only. For care fees, a council can look back as far as it likes
• Trusts aren't a shortcut either — councils can treat trust assets the same way if avoiding fees was a motive
• England's self-funding threshold is £23,250 (lower limit £14,250) — these differ elsewhere in the UK
• Get professional advice — ideally a SOLLA-accredited solicitor — before moving significant assets

What this means for your own inheritance

If you receive Carer's Allowance, Universal Credit, or Pension Credit, an inheritance paid directly to you can count as capital and affect your entitlement. A trust set up before the money changes hands is what prevents this — not after.

What to do next

1. Find out if a will exists, and roughly how old it is
2. If capacity is still intact, encourage a review — this window doesn't stay open
3. If anyone might inherit while on means-tested benefits, raise trusts by name with a solicitor
4. Never move or gift assets purely because care fees look likely, without advice first
5. Keep LPA and will planning in the same conversation, not separate ones