The government’s decision to bring most unused pension funds within the scope of inheritance tax (IHT) from April 2027 has prompted many individuals to revisit their estate planning. Financial advisers are already seeing increased interest in gifting wealth during lifetime, drawing down pension funds earlier than planned and restructuring assets to reduce future IHT liabilities. This raises an important legal issue that is often overlooked: the potential impact on future eligibility for local authority-funded care.
A strategy that is entirely legitimate from an IHT perspective may nevertheless attract scrutiny under the Care Act 2014 if the individual later requires residential or domiciliary care. For solicitors advising older clients, this is a timely reminder that estate planning and social care law are increasingly intertwined.
One of the most common misconceptions is that rules governing IHT gifts and deprivation of assets are broadly aligned. They are not. For IHT purposes, advisers are familiar with the concept of potentially
