LPA House sale proceeds strategy

DemeSon

My father has full on  dementia and is in long term care which he is paying for from his savings. Assuming we dont go into hyper inflation his savings will cover 15 years of care  at current rates.   Pragmatically my father could die anytime between 30 days and 10 years. 

We're about to exchange contracts on my fathers property. It would have been significantly more tax efficient to sell after his death but it's been impossible for the siblings to agree the shape of the negotiating table let alone a property management  strategy so here we are. The net proceeds will be approx £700K.  There are two joint/several LPA  and one further sibling as beneficiaries of the estate (3 people total). The sibling relationship is a filling of trust between two slices of contempt.   One of the LPAs (also the executor of the estate) lives overseas which makes legal and financial account opening and transactions a nightmare because anyone who lives overseas is automatically a criminal to the UK banking and legal  system.  Two of the siblings are well funded, the third is not and is requesting loans against their inheritance. We have £700K to put somewhere safe. 

My father has two existing bank accounts (Nationwide/ Santander) both paying basically zero interest currently.  Santander is favoured because they are much more practical on their joint  LPA appoach.   

I'd appreciate any suggestions on what to do with the above. My thinking is that we need something like a six month or one year fixed investment.   Probate would be six months, I cant see anyone accepting more than 12 months. Perhaps someone with more imagination than me has a better idea.

        

Malthusian

We're about to exchange contracts on my fathers property. It would have been significantly more tax efficient to sell after his death but it's been impossible for the siblings to agree the shape of the negotiating table let alone a property management  strategy so here we are. 

How so? In the short term it should make no odds due to primary residence relief. 

And keeping your father's money invested in a single illiquid property would be unlikely to be in his interests anyway. It is also likely to be more tax-inefficient.

One of the LPAs (also the executor of the estate) lives overseas which makes legal and financial account opening and transactions a nightmare because anyone who lives overseas is automatically a criminal to the UK banking and legal  system. 

Shouldn't be a major obstacle given that he isn't going to open a UK bank account, your father is.

As he did the job properly and ticked "joint / several", it doesn't matter much as long as the other sibling can sign. Even if the UK-based sibling (you?) is unavailable and the overseas sibling does need to sign, banks and any other financial providers are still obliged to accept their signature. It might just take a bit more effort to verify ID.

Two of the siblings are well funded, the third is not and is requesting loans against their inheritance.

You may already be aware that that is an absolute non starter, as it is not in your father's interest. 

Unless your father has already instructed the attorneys to make such loans in the LPA and they didn't effect his financial security, and even then it would be sensible to request approval from the OPG.

I'd appreciate any suggestions on what to do with the above. My thinking is that we need something like a six month or one year fixed investment.   Probate would be six months, I cant see anyone accepting more than 12 months.

Sorry, I can't recommend one bank or another. It is worth bearing in mind that some banks (not all) will allow early access on death of the accountholder for long term fixed rate bonds. So it may be worth looking at longer term bonds and checking the T&Cs.

If he has enough in savings to last him 15 years then the attorneys may wish to consider investing some of the savings so that the money earmarked for care from years 5-15 has a chance to keep pace with inflation. But some people dismiss the idea of investing an elderly dementia patient's money out of hand. You would need independent financial advice - and if it would cause conflict between the Attorneys it may not be worth the strife.

fwor

To re-iterate two of the points that Malthusian has made:

The attorneys must make clear to the third sibling that "requesting loans against their inheritance" should not be on the table for negotiation. It would not be legal for the attorneys to allow this, unless it could clearly be shown that it was in the father's interests.

When we (I and my sister) were in a similar position, we set up a "savings ladder" with just one year's worth of care home costs available in an instant access savings account. The remainder of our mother's cash was kept in fixed-term savings bonds, with a year's worth of savings in a 1-year bond, a year's worth in a 2-year bond and the remainder in a 3-year bond. This was intended to give us the best rates available at the time without having to resort to the risks associated with non-fixed-rate investments.

We used HSBC because, at the time, they had (unusually) competitive rates. But it was also clear that their fixed-term bonds would terminate upon the death of the holder - and this is in fact what happened, with no loss of interest (i.e. they simply applied interest pro-rata for the amount of time that the bond was open). Whether that is still true, I don't know (you would have to check T&C's) and of course HSBC would not be the provider of choice now in terms of best interest rates!

As already said, you are fortunate to have enough money available to consider a longer-term view than we did, and that this could involve both savings and investments. I would agree that you really need independent advice about that.

DemeSon

Thanks for responses.

On tax this might be a confusion with  inheritance tax

My understanding on the tax is. (from UK gov inheritance tax site Aug/2022)

The basic death tax threshold is £325K

If you own your home your tax-free threshold can increase to £500K.

 if:-

You leave it to your children (including adopted, foster or stepchildren) or grandchildren.

Your estate is worth less than £2 million.

 Those things applied to us. Based on todays rules as I understand them and all other things being equal, having £700K of net house is £70K-£140K more tax efficient to the beneficiaries than having £700K of cash at time of death.

It is possible that with two parents on the title deed the  tax free threshold is £1M. 

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The non funded sibling has been living in the property for several years, was receiving carer allowance while my father lived there, and has been caretaking since. On sale of property they will  be homeless. We agree that my father would want them to have somewhere to live, and would have lent them the money ( he has in the past).  This is a one off actual loan and would be for the purpose of relocating and to cover first years rental. 
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On the joint and several thing we've found that while one person can legally sign for my father,  depending on the organisation and transaction size they will usually insist on both as policy. At the very least they usually want email consent from the second LPA. My assumption is that if LPA's fall out they can then independently reverse or escalate each others actions or even get lawyers involved and sue each other or the organisation.  

Malthusian

DemeSon said:

Thanks for responses.

On tax this might be a confusion with  inheritance tax

My understanding on the tax is. (from UK gov inheritance tax site Aug/2022)

The basic death tax threshold is £325K

If you own your home your tax-free threshold can increase to £500K.

 if:-

You leave it to your children (including adopted, foster or stepchildren) or grandchildren.

Your estate is worth less than £2 million.

 Those things applied to us. Based on todays rules as I understand them and all other things being equal, having £700K of net house is £70K-£140K more tax efficient to the beneficiaries than having £700K of cash at time of death.

He will still have the Residential Nil Rate Band available on death due to "downsizing relief". And can claim his late spouse's unused RNRB, even if the Government hadn't yet dreamt it up when they died, and whether or not the late spouse was on the deeds.
So the sale of the property in life makes no odds.

The non funded sibling has been living in the property for several years, was receiving carer allowance while my father lived there, and has been caretaking since. On sale of property they will  be homeless. We agree that my father would want them to have somewhere to live, and would have lent them the money ( he has in the past).  This is a one off actual loan and would be for the purpose of relocating and to cover first years rental. 

Tricky. I would still be seeking the OPG's approval, but it sounds like a good case for it meeting the attorneys' duty, as it helps smooth the process of selling the house in order to obtain a return on the capital, and takes into account what the father would have done if he had been managing his own finances (based on previous actions). And it sounds as if the chance of him needing to call in the loan to meet his care costs (at which point things could get really messy) is minimal. But I am not a solicitor or a Court of Protection judge.

Is the overseas sibling on board with this? If they're one of the "slices of contempt" I would want my backside covered against any attempt to claim misuse of the LPA.

Can either of his siblings lend the money instead, to be repaid from the non-funded sibling's inheritance? 

On the joint and several thing we've found that while one person can legally sign for my father,  depending on the organisation and transaction size they will usually insist on both as policy. 

They cannot insist on that. The law is clear. He did the job properly and ticked "joint and several", which means one signature from one attorney is as good as your father's own.

They can legitimately ask to verify the identity of all attorneys, but cannot ignore your father's legally valid instructions and pretend it's a joint only LPA.

My assumption is that if LPA's fall out they can then independently reverse or escalate each others actions or even get lawyers involved and sue each other or the organisation.  

Correct, and at the point the organisation becomes aware of that, they will have to freeze everything until the courts knock the attorneys' heads together and resolve the dispute one way or another.

But at the moment you aren't bombarding anyone with contradictory instructions so that doesn't affect anything. 

xylophone

I wonder would it be possible to buy a smaller property in your father's sole name and come to an arrangement whereby your sibling occupies it?

DemeSon

xylophone said:

I wonder would it be possible to buy a smaller property in your father's sole name and come to an arrangement whereby your sibling occupies it?

See above comment on the shape of the negotiating table. I think that ship has sailed unfortunately.  

Malthusian said:

He will still have the Residential Nil Rate Band available on death due to "downsizing relief". And can claim his late spouse's unused RNRB, even if the Government hadn't yet dreamt it up when they died, and whether or not the late spouse was on the deeds.
So the sale of the property in life makes no odds.

This I did not understand or know about before so thank you. 

Malthusian said:

Tricky. I would still be seeking the OPG's approval, but it sounds like a good case for it meeting the attorneys' duty, as it helps smooth the process of selling the house in order to obtain a return on the capital, and takes into account what the father would have done if he had been managing his own finances (based on previous actions). And it sounds as if the chance of him needing to call in the loan to meet his care costs (at which point things could get really messy) is minimal. But I am not a solicitor or a Court of Protection judge.

 Off topic but as far as i can see the OPG  have no enforcement whatsoever. The OPG itself says

".....LPAs are a private agreement between individuals, the Office of the Public Guardian must register an LPA before it can be used."

The OPG are essentially  gatekeepers to a process. The most recent review  did an in depth look at streamlining the entry requirements. There was no review of enforcement as far as I can tell.  Once you are inside there are no checks or balances or real enforcement.   The dementia forums have heartbreaking stories of care funds and inheritances being cleaned out by LPA's

We're new to this, it all happened during lockdown and there are definitely decisions I'd make differently with hindsight. Despite that, and our family friction I believe we are acting with positive intent in the best interests of my father.

But I dont see any protection for Dad in the system at all.  

Not sure i got any advice on savings but did learn something very useful on Tax so thank you again.