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.

Executors – Who to choose?

Solicitors tend to make strong arguments to have professional executors so the Will is executed professionally. On the other hand Will writers tend to allow the client to choose family members as executors and only choose professionals if no one comes to mind.

So who’s right?

Well I would argue that both are right. The Will writers focus on reducing costs to the testator. Professional executors can be expensive charging a percentage of the estate, bank trust companies often charge in this way. Solicitors, once named in the Will as executors are reluctant to step down after the testator’s death if requested to do so by the beneficiaries. Some even charge a fee for doing so or simply refuse to be removed. But why would you want to remove them? Solicitors often charge on an hourly basis for this work and it is deducted from the testator’s estate, so beneficiaries if they have the time and inclination to act themselves may request this. If the estate is not being dealt with promptly this can be the source of disputes hence a request to remove solicitors as executors.

On the positive side professional executors can avoid the following problems

  • Dispute between lay executors delaying matters potentially creating a stalemate or worse still a family rift
  • Executors not fully understanding their responsibilities under the various Trustee Acts
  • Not setting up trusts, or understanding the role of trustees
  • Not understanding the required probate and Inheritance Tax forms
  • The executor(s) may fall ill or loose mental capacity
  • Liability can fall on the executors if they act negligently or if they submit a fraudulent Inheritance Tax return to HMRC they can be imprisoned.

So what are the advantages of having family as executors?

The executors can in fact be the beneficiaries. So a classic example is Mr & Mrs Jones with two adult children choosing the two children as their executors and also being the beneficiaries.

The children will have a keen interest in sorting out the estate quickly and efficiently and if they have some skills in organisation and administration that is an advantage. Because they are likely to know all the beneficiaries it is generally easier to locate them.

Of course, lay executors such as these adult children can seek the advice of professionals from outset or when they find themselves out of their depth and can hand over to a professional executor or accept their help on an ad hoc basis with them charging accordingly. But note they can shop around for the best professional in terms of costs and skills.

Mix and match. There is nothing to stop a testator choosing BOTH family and a professional executor to act as executors. This may solve some of the problems mentioned above, but it will come at a cost as the professional has to be paid and doesn’t prevent executors being in dispute with each other.

16924691 - aren't you glad we had this meeting to resolve our conflict