Lasting Power of Attorney

Pat38493

Keep_pedalling said:

Pat38493 said:

The reason these rules exist is to avoid the temptation to use up the donors assets before they can used to pay for the donors care, or an attempt to avoid IHT.

OK - so what you are saying is that the legal definition of their best interests may be nothing to do with what they would have wanted or even planned, in a sense.

This because strangely, as far as I understand and I might be mistaken, there is nothing to stop me as an individual from gifting large amounts of money to children if I have been diagnosed with, for example, a slow onset physical disease, in order to precisely what you say above.  But if the incapacity is mental, the attorney cannot do that.  Maybe there is a law against that and I'm not aware of it?

Also from what I saw on gov.uk web site, there is nothing to stop you from giving amounts like £x00 per month to children to support their living costs and this would count as regular funding and not gifting as long as it was sustained.  Presumably the attorney could continue this if it was already in place.

Also, although you may be correct in terms of the legal situation, I would question whether in real life someone planning to make a gift would do it immediately - they may be planning to do it when the children reach a certain age or life stage. 

Linton

Keep_pedalling said:

Pat38493 said:

One other question - I think there was a comment above that you have to lodge a report of everything you have done each year under the POA?  Or was that only if you don't have one and have to apply through the courts for a Depputyship?

Only required for deputyship

From the comments on gov.uk , it seems like for an LPOA, you don't need to submit any kind of regular report, but you should keep records of "major decisions" made.  Normally your actions would not be challenged unless someone complains about it or raises a concern - that's what is implied?

I ask because I'm not sure I want one of these if it means that some kind of government agency can ask me to prove that I'm acting in my spouse's best interests when they have never met her and I have lived with her for decades.

Also there was a bit of discussion above along the lines of "we are not sure if we should do that as it was never discussed with them" - what if it was discussed but only verbally?  For example what if you discussed with your spouse many times the intention to gift money to children to help with a house deposit, but obviously they have not actually transacted it before because this only tends to be done once in a lifetime?  On the one hand, if it's your spouse, you are in a better position to know their wishes than any government regulator.  On the other hand, most people don't keep a written signed record of their verbal discussions with their partner.

The rules are fairly simple, once someone has lost mental capacity, you have to act in their best interests alone, you cannot make gifts based on conversations you have had in the past. If people want to help their children with gifts then if they have the means to do so then they do it rather than talk about it. If they did not gift because they could not afford to do so them it is highly likely that the savings they do have may still be needed for their own needs so giving it away would be classed as deliberate deprivation of assets.

The reason these rules exist is to avoid the temptation to use up the donors assets before they can used to pay for the donors care, or an attempt to avoid IHT.

LPAs are part of planning our demise, which should be done along side making a will and possible taking steps to minimise IHT. All this should be done as early as possible and you certainly should not be leaving it until your dotage when it may me too late to do any of those things.

Exactly.  PoA is a very powerful position and there must be rules in place to protect the donor. Whenever you want to make a financial decision on behalf of the donor where there is any doubt as to whether it is explicitly permitted by the rules I suggest you ask yourself "could I explain to a neutral 3rd party, say a judge, exactly why this is in the donor's interest".  If there is any doubt don't do it.

For obvious reasons  "the donor would have wanted it" is not good enough - you may have thought that the donor would have wanted to buy you a new car or pay for your holiday but for you to make that decision on the donor's behalf is beyond your authority as an Attorney.  People who may have thought in that way have been brought before the courts where such matters are taken very seriously. I read of one particularly blatant case where an Attorney was sentanced to 4 years in jail.

If you believe there are special circumstances you can apply to the Court of Protection for approval.    In the past inheritance planning for example has been approved but only in the specific circumstances raised.  It does not set a general precedent.

See https://www.clarkewillmott.com/news/inheritance-tax-planning-lasting-powers-of-attorney/ 

Pat38493

Linton said:

Exactly.  PoA is a very powerful position and there must be rules in place to protect the donor. Whenever you want to make a financial decision on behalf of the donor where there is any doubt as to whether it is explicitly permitted by the rules I suggest you ask yourself "could I explain to a neutral 3rd party, say a judge, exactly why this is in the donor's interest".  If there is any doubt don't do it.

For obvious reasons  "the donor would have wanted it" is not good enough - you may have thought that the donor would have wanted to buy you a new car or pay for your holiday but for you to make that decision on the donor's behalf is beyond your authority as an Attorney.  People who may have thought in that way have been brought before the courts where such matters are taken very seriously. I read of one particularly blatant case where an Attorney was sentanced to 4 years in jail.

If you believe there are special circumstances you can apply to the Court of Protection for approval.    In the past inheritance planning for example has been approved but only in the specific circumstances raised.  It does not set a general precedent.

See https://www.clarkewillmott.com/news/inheritance-tax-planning-lasting-powers-of-attorney/ 

Very interesting article because it does say that "The court found that there was clear evidence that JMA had in the past wanted to make gifts to her son and others and that she was open to tax planning. The planned gifts were therefore “consistent with the beliefs and values JMA demonstrated when she was able to manage her financial affairs” "

Therefore in this particular case it was relevant that the person had clearly discussed this type of thing in the past an open to the idea.  What's not clear of course is how it would have evolved if the son had just gone ahead and did it and then it was challenged later.  Would the result have been the same?  I guess it depends on the court and the day.

Taking money out to buy a Ferrari for the attorney themselves is clearly a completely different scenario.

The other point that was puzzling me is - who decides if and when I am not mentally fit to make my own decisions?  I was a bit reassured as I have read up on this a bit and it seems that for example, if I was diagnosed with dementia, this does not make me instantly and irrevocably unfit to make my own decisions.  It is more an assessement that has to be made on an ongoing basis with support from a doctor if needed.

saucer

Pat38493 said:

The other point that was puzzling me is - who decides if and when I am not mentally fit to make my own decisions?  I was a bit reassured as I have read up on this a bit and it seems that for example, if I was diagnosed with dementia, this does not make me instantly and irrevocably unfit to make my own decisions.  It is more an assessement that has to be made on an ongoing basis with support from a doctor if needed.

Indeed. Capacity can and does fluctuate. Moreover a judgement of capacity is both time  and decision specific. The threshold for capacity to decide what to have for dinner is legally lower than for more consequential decisions. Moreover capacity is  assumed regardless of diagnosis unless there is evidence otherwise. In the case of moderate stage dementia this is often apparent. Where capacity is assessed as not being present a Best Interests decision is made which must be based on a number of criteria of which the past wishes and preferences of the doner is one (key) consideration. 

Nebulous2

Pat38493 said:

Linton said:

Exactly.  PoA is a very powerful position and there must be rules in place to protect the donor. Whenever you want to make a financial decision on behalf of the donor where there is any doubt as to whether it is explicitly permitted by the rules I suggest you ask yourself "could I explain to a neutral 3rd party, say a judge, exactly why this is in the donor's interest".  If there is any doubt don't do it.

For obvious reasons  "the donor would have wanted it" is not good enough - you may have thought that the donor would have wanted to buy you a new car or pay for your holiday but for you to make that decision on the donor's behalf is beyond your authority as an Attorney.  People who may have thought in that way have been brought before the courts where such matters are taken very seriously. I read of one particularly blatant case where an Attorney was sentanced to 4 years in jail.

If you believe there are special circumstances you can apply to the Court of Protection for approval.    In the past inheritance planning for example has been approved but only in the specific circumstances raised.  It does not set a general precedent.

See https://www.clarkewillmott.com/news/inheritance-tax-planning-lasting-powers-of-attorney/ 

Very interesting article because it does say that "The court found that there was clear evidence that JMA had in the past wanted to make gifts to her son and others and that she was open to tax planning. The planned gifts were therefore “consistent with the beliefs and values JMA demonstrated when she was able to manage her financial affairs” "

Therefore in this particular case it was relevant that the person had clearly discussed this type of thing in the past an open to the idea.  What's not clear of course is how it would have evolved if the son had just gone ahead and did it and then it was challenged later.  Would the result have been the same?  I guess it depends on the court and the day.

Taking money out to buy a Ferrari for the attorney themselves is clearly a completely different scenario.

The other point that was puzzling me is - who decides if and when I am not mentally fit to make my own decisions?  I was a bit reassured as I have read up on this a bit and it seems that for example, if I was diagnosed with dementia, this does not make me instantly and irrevocably unfit to make my own decisions.  It is more an assessement that has to be made on an ongoing basis with support from a doctor if needed.

Our training from the OPG was broad-ranging about their role, with a few extreme examples thrown in to highlight where things could end up if there were no checks and balances. They definitely were not saying that many people acted like that. 

In Scotland the law is somewhat different, and it is all I am familiar with. The POA document should say how incapacity will be assessed and normally that Is by a Doctor issuing a section 47 certificate under the adults with incapacity act - so a formal assessment before you can assume welfare powers.

Financial powers don't need that, as said earlier. 

Keep_pedalling

Pat38493 said:

Linton said:

Exactly.  PoA is a very powerful position and there must be rules in place to protect the donor. Whenever you want to make a financial decision on behalf of the donor where there is any doubt as to whether it is explicitly permitted by the rules I suggest you ask yourself "could I explain to a neutral 3rd party, say a judge, exactly why this is in the donor's interest".  If there is any doubt don't do it.

For obvious reasons  "the donor would have wanted it" is not good enough - you may have thought that the donor would have wanted to buy you a new car or pay for your holiday but for you to make that decision on the donor's behalf is beyond your authority as an Attorney.  People who may have thought in that way have been brought before the courts where such matters are taken very seriously. I read of one particularly blatant case where an Attorney was sentanced to 4 years in jail.

If you believe there are special circumstances you can apply to the Court of Protection for approval.    In the past inheritance planning for example has been approved but only in the specific circumstances raised.  It does not set a general precedent.

See https://www.clarkewillmott.com/news/inheritance-tax-planning-lasting-powers-of-attorney/ 

The other point that was puzzling me is - who decides if and when I am not mentally fit to make my own decisions?  I was a bit reassured as I have read up on this a bit and it seems that for example, if I was diagnosed with dementia, this does not make me instantly and irrevocably unfit to make my own decisions.  It is more an assessement that has to be made on an ongoing basis with support from a doctor if needed.

With things like dementia the loss of mental capacity is gradual, as was the case with my mother. We registered the LPA with the bank while she still had the capacity to give that permission. I then had my own card and full access to her accounts, but she also still had he4 own card and full access as well. Once her condition got to the stage of requiring residential care I informed the bank and her card was s topped and I had sole access. 

While the donor has mental capacity an attorney can only act for them with permission, so my advice if either of you is diagnosed with dementia is to register the POA with the banks in the early stages which will make things easier as capacity worsens.

ossie48

We really need to instigate this for my father in law but I fear its too late. He's 84 and in very poor health after a serious fall, currently in hospital and we've nearly lost him twice over the past two weeks.

We've been assisting in managing his finances (with his agreement) for quite a few years. If we instigate the process ASAP (he still has capacity on a good day) would it be negated if he passes on before things are finalised and roughly how long does the process take. Notwithstanding thanks to the advice on here my wife and I will both instigate the process for each other. 

Linton

ossie48 said:

We really need to instigate this for my father in law but I fear its too late. He's 84 and in very poor health after a serious fall, currently in hospital and we've nearly lost him twice over the past two weeks.

We've been assisting in managing his finances (with his agreement) for quite a few years. If we instigate the process ASAP (he still has capacity on a good day) would it be negated if he passes on before things are finalised and roughly how long does the process take. Notwithstanding thanks to the advice on here my wife and I will both instigate the process for each other. 

If your FIL loses capacity to make financial decisions then you will need to apply to the courts for a deputyship which will give you much the same powers.  I believe that could take months.  So get it sorted immediately.

Immediately the donor dies PoA becomes invalid and the executor has sole control.   They should inform the banks etc who will freeze his bank accounts.  Up to a limit (usually very high) the bank will transfer money in the account to the executor.

Keep_pedalling

ossie48 said:

We really need to instigate this for my father in law but I fear its too late. He's 84 and in very poor health after a serious fall, currently in hospital and we've nearly lost him twice over the past two weeks.

We've been assisting in managing his finances (with his agreement) for quite a few years. If we instigate the process ASAP (he still has capacity on a good day) would it be negated if he passes on before things are finalised and roughly how long does the process take. Notwithstanding thanks to the advice on here my wife and I will both instigate the process for each other. 

Once submitted it normally takes around 8 weeks but I think the lead time is somewhat longer than that now. LPAs end once the donor has died so if death occurred between the application to register it and before it has been registered it will never become effective. 

Albermarle

ossie48 said:

We really need to instigate this for my father in law but I fear its too late. He's 84 and in very poor health after a serious fall, currently in hospital and we've nearly lost him twice over the past two weeks.

We've been assisting in managing his finances (with his agreement) for quite a few years. If we instigate the process ASAP (he still has capacity on a good day) would it be negated if he passes on before things are finalised and roughly how long does the process take. Notwithstanding thanks to the advice on here my wife and I will both instigate the process for each other. 

We started ours on Sept 1st 2022, and received the registered LPA's a couple of weeks ago. There was minimal delay in getting the forms signed, and there were no mistakes. 

All LPA's become invalid, when the donor dies.