Estate planning is rarely just about tax. For many people, it also involves planning for future care needs, deciding how and when to pass wealth to family, and avoiding unintended consequences later in life.

In Scotland, tax planning, gifting and care planning are closely linked. A decision that seems sensible for Inheritance Tax purposes can create difficulties when care is required, or lead to misunderstandings within families if expectations are not managed properly. The key is understanding how these issues interact, and planning early with the right advice.

Gifting assets: more than a tax decision

Many people gift assets during their lifetime as a way to reduce the value of their estate for Inheritance Tax purposes. In principle, this can be effective. Lifetime gifts may fall outside your estate if you survive for seven years, and gifts between spouses or civil partners are generally exempt.

However, in Scotland, gifting can have wider implications, particularly if care is needed later in life. Once assets are given away, they are no longer yours to control. This can affect your financial security, independence, and ability to fund care if circumstances change.

It can also cause practical issues. Family relationships may change, recipients may divorce or face financial difficulties, and assets you assumed would always be available may no longer be so.

Care fees and “deliberate deprivation”

One of the most common concerns we hear is whether gifting assets can protect against future care fees. This is an area where misunderstandings are common.

Local authorities in Scotland conduct financial assessments to determine how much someone should contribute to their care. If assets have been given away with the intention of reducing care costs, the local authority may treat those assets as still belonging to the individual. This is often referred to as deliberate deprivation of assets.

There is no fixed time limit after which gifts are automatically ignored. Instead, the assessment considers timing, intention and circumstances. Gifts made when someone was already considering care, or when declining health made future care foreseeable, are more likely to be challenged.

This means that gifting purely to avoid care fees, particularly later in life, can be ineffective and may further complicate matters.

Balancing tax planning with care planning

Effective estate planning is about balance. While inheritance tax planning remains important, it should not undermine your ability to live comfortably or to receive appropriate care if needed.

Good planning considers:

• Retaining sufficient assets and income to fund later-life care
• Using exemptions and allowances appropriately rather than aggressively
• Understanding how property, savings and investments are treated in care assessments
• Reviewing plans regularly as health, family and finances change

In some cases, doing nothing can be as risky as doing too much and leaving matters until a crisis arises often limits options and increases stress for both you and your family.

The importance of Powers of Attorney

Care planning is not only about money. Having a Power of Attorney in place is essential to protecting yourself and your estate.

If you lose capacity and no Power of Attorney exists, decisions about your finances and welfare may require a court application, which can be time-consuming, costly and stressful. A properly drafted Power of Attorney enables trusted individuals to manage your affairs, make care-related decisions and ensure your wishes are respected.

From an estate-planning perspective, this provides continuity and clarity when they are most needed.

Managing family expectations

Lifetime gifting and estate planning can also affect family dynamics. Assumptions about “early inheritance” can cause tension if circumstances change or if family members perceive fairness differently.

Clear advice, proper documentation and, where appropriate, open conversations can help manage expectations and reduce the risk of disputes.

Planning early protects everyone

The most effective plans are usually put in place before care is needed, while all options remain available. Early planning allows you to:

• Protect your financial security
• Support your family in a structured and thoughtful way
• Reduce tax exposure without creating care-fee risks
• Put decision-making arrangements in place before they are urgently needed

How Paris Steele can help

Estate planning is not a one-size-fits-all exercise. At Paris Steele, we take a holistic approach considering tax, care planning, gifting, and personal circumstances together rather than in isolation.

Seeking advice early can help you put plans in place to protect you and your family now and in the future. If you would like to discuss your estate planning, or review existing arrangements, our Private Client team would be pleased to help. Getting the right advice at the right time can make all the difference. Get in touch now to get things started.