Category Archives: Powers of Attorney

Lasting Powers of Attorney -The Facts

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In later life we expect to perhaps become forgetful, but none of us believe that we could lose our mental capacity, because those sorts of things happen to other people, not us. After all ” I’m only 50, I’m only 60, I’m only 70″ etc. Mental decline may occur slowly over time or by a sudden event such as a stroke or accident. Of course you may be lucky and keep your mental capacity right up until your eventual demise.

However if we lose mental capacity and decisions need to be made about our property and affairs someone needs to make an application to the Court of Protection to act on our behalf. That someone may be a member of your family or even the local authority to extract the cost of any care. These appointed people are known as deputies.

This process entails Court fees of various types totalling approximately £800 and lawyer’s costs averaging £1500 from your own resources. A full statement of your financial affairs is submitted to the Court. In addition there will be a deputy’s charge for running your affairs and accounting up to £800 pa.  At the end of that process it will not be someone you chose to act for you!

The better alternative is to act in advance and prepare a Lasting Power of Attorney (LPA). While you have your mental capacity you can prepare the document to appoint a person or people to act for you that you choose in the event of loss of mental capacity. These people can be family or friends, but should of course be people you can trust.

What are the two types of LPA?

The most commonly executed LPA is the type for Property and Affairs which as the name suggests allows your chosen attorneys to undertake transactions with regard to your property and affairs, from the mundane day-to-day cash requirements all the way up to significant transactions such as selling or buying a home for you.

The less common, but arguably equally important, is the LPA for Health and Welfare. This allows your attorneys to act for you, organising your day-to-day care, including arrangements for medical, eye, or dental care. This document also gives you an option to choose whether your attorneys are to be involved with decisions about life sustaining treatment. This document can also be very important in allowing your attorneys to act in your best interests if you are involved with local authority care, asking the right questions and getting the best care for you.

Can my attorneys overrule me by saying “I’m dotty”?

The Mental Capacity Act has clear guidelines that are explicitly spelt out in the document. Your attorneys must assume that you can make your own decisions unless they establish that you cannot. Also your attorneys cannot treat you as unable to make decisions even if they judge those decisions to be unwise.

So in summary you should always be in control until it is established that you cannot make decisions.

Can I use the LPA when I have full mental capacity?

Providing you have not put any restrictions in the document the answer is Yes. This can be useful if say for example you have limited mobility or simply in old age. You can ask your attorneys to perform certain tasks and report back to you with the outcome. An example may be to visit a local bank or building society with regard to the maturity of a fixed rate bond.

How can I get an LPA in place?

You can prepare the documents yourself by going to the website of the Office of the Public Guardian at www.gov.uk/power-of-attorney or you can let a professional do the work to ensure the forms are completed correctly.

If you can ask Will You Ltd to prepare the documents for you here are the advantages :

  • We visit you and explain the Lasting Power of Attorney
  • We can explain to your chosen attorneys their role if they need  guidance
  • We complete the paperwork for you to sign
  • We offer to guide you through the signing process
  • We register the documents on your behalf until to have a valid registered document

 

 

Lasting Powers of Attorney and Investments

If you have invested funds with a bank or investment house you may well have given them authority to buy and sell shares or funds, much in the same way an old fashioned stockbroker may have acted for you.

These are known as discretionary fund managers or DFMs. Examples are firms such as Charles Stanley, Brewin Dolphin, Seven Investment Management, Rathbones etc.

However the problem comes if you lose mental capacity. Paragraph 7.38 of the Mental Capacity Act 2005 Code of Practice states that “the attorney must make these decisions personally and cannot generally give someone else authority to carry out their duties.

If the donor wants the attorney to be able to give authority to a specialist to make specific decisions, they need to clearly state it in the Lasting Power of Attorney document (for example, appointing an investment manager to make particular investment decisions).”

So advisers need to be clear that their client does not have any schemes such as discretionary fund management, investments held by nominees or the managers of the scheme, and perhaps also need to ensure that they are unlikely to have such an arrangement in the future. Don’t forget that DFMs can also be managing pension funds within Self Invested Pension Plans.

In addition, it would be nice to allow the attorneys the possibility of investing in such a way. So in cases where the client has investments, it would be prudent to include the special wording in the Lasting Power of Attorney for Property and Affairs, just in case. Otherwise it may be necessary to rearrange long standing investment arrangements so there is no “discretionary” element involved in investment decisions.

However, when you deal with a company like Will You Ltd you would expect them to have a conversation around this to ensure your interests are protected. If you are concerned about this, please do not hesitate to contact us for advice.

 

 

ACT NOW!

 

I remember back in my days in financial services we had a rubber stamp in the office with a red ink pad that said “ACT NOW!” and where necessary we used to stamp it on client letters.

Over the last month I have seen the consequences of not acting with regard to Lasting Powers of Attorney and leaving it to the last minute in hospital with considerable difficulties. I would urge you whatever age you are to consider having a “notional heart attack” now.

Is your Will up to date?

Is your Lasting Power of Attorney in place?

What about all your internet passwords?

Have you made any contingency plans if suddenly you are not able to act?

Some years ago we also saw a real heart attack situation where the father never expected to suddenly die. He never changed his Will, like he told his children he would, and it created a severe family rift.

I never bullied clients to take action, but sometimes I feel I did them a dis-service. So please if you are advising clients, please gently get them  to take appropriate action before it’s too late.

Income Withdrawal and Powers of Attorney

The recent stockmarket volatility after the referendum has focused the importance of active management of investments and pension funds to maximise returns and prevent losses.

Annuities rates are now very low and the trend is downwards. This means that many more retirees are creating Income Withdrawal accounts with their pension funds.

However in order to manage your investments and pension income it is a good idea to have good brains at work and that is not possible if you have lost mental capacity in retirement. Unlikely as you may think now, do you know that you will never be affected by stroke or dementia?

To avoid the problem you should consider setting up a Lasting Power of Attorney now for your property and affairs if you haven’t already done so. You can appoint in the document a person (known as an attorney) to act for you, and you can choose someone with investment expertise or your trusted adviser. Or more simply when you draw up the document you can express your wish that with regard to any Income Withdrawal accounts that your chosen attorneys review your pension fund each year with your financial adviser.

How do we know this is a problem?

Because we have seen situations occuring where there is no Lasting Power of Attorney in place. The alternative which is an application to the Court of Protection is expensive and time consuming and you will not get a chance to choose the attorneys who act for you. We would recommend you take control and act now.

Inheritance Tax planning after loss of mental capacity

Many advisers ask this question, and the truth is that planning is severely restricted but sometimes possible.

 

Large lifetime gifts

Firstly the advise6498081_sr must consider the position of the person who has lost capacity, let’s call them P. Do they have a Power of Attorney in place? If not, has anyone been appointed as a deputy by the Court of Protection? To what extent have they lost mental capacity?

For example P may still have the mental capacity to understand and approve a simple lifetime gift, but not have the mental capacity to understand and approve a sophisticated investment such as a Discounted Gift Trust. As such, it would be prudent to request and record a mental capacity test prepared by a professional at the point of making such a gift. Of course, P could fail the test.

Hereafter we will assume that P does not have any remaining mental capacity and that they have an appointed attorney under a Lasting Power of Attorney for property and affairs.

The attorney must act in Ps best interests. So it would appear to be logical that there is no way that gifting monies or assets to others could possibly be in P’s best interests. However if an attorney or deputy want to present a case to make a lifetime gift or a specific investment for Inheritance Tax planning they can ask the permission of the Court of Protection.

The Court of Protection will take into account the following:

  • The information presented to them
  • How much the gift is in relation to the size of their estate
  • Will there be enough financial resources remaining for P for the rest of their life?
  • Will the gift change the treatment of beneficiaries bearing in mind the contents of the last Will?
  • Had P done any Inheritance Tax planning before loss of mental capacity?

The Court may agree that making a gift is in P’s best interests, bending the “best interest” principle somewhat. However there may be situations where it is not worth making an application to the Court, for example where P’s wealth has been derived from a successful personal injury payment which was meant to provide for them only.

What if the attorneys just go ahead and make lifetime gifts?

In serious cases this may be regarded as fraud and a matter for the police. Alternatively the attorneys may be asked to pay the money back personally, or at least have their appointment as an attorney revoked. Not good options if the gift is likely to be contentious.

 

How can an attorney create, change, or update P’s Will for Inheritance Tax planning?38697289_s

Answer, they can’t. The attorney cannot create, change, or update a Will. However once again an application can be made to the Court of Protection for what is known as a Statutory Will. This can be a new Will that can take advantage of IHT planning.

The Court takes this very seriously and is likely to involve the Official Solicitor. The fullest information should be presented similar to the bullet points above for lifetime gifts. However anyone who may be disadvantaged by such a Statutory Will that would benefit under the previous Will or intestacy can object to the application.

Incidentally all these actions involve expense, and you should consider the legal costs and where the burden of the costs will fall. In some cases however it will definitely be worth the trouble.

So in conclusion, the moral of the story is to ensure that elderly clients act while they have their full mental capacity and deal with these issues as urgent before it becomes impossible.