Lasting Power of Attorney

Albermarle

Pat38493 said:

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. 

Just thinking through some of the points you raise, and some of the answers.
It sounds like
1) If a couple plan to give a large gift to an adult child for a house deposit ( for example) at some later date.
2) If one  of the couple has slowly  deteriorating mental capacity ( as opposed to something sudden).

Then maybe the best course of action is to move the majority of family assets into the name of the healthy partner, or in joint accounts, whilst the mental capacity issue is still in the early stages. The healthy partner can then have the ability to make the gift directly from their own money when the time comes, and not have to worry about breaching any LPA requirements/duties by gifting from the donors assets when their condition had progressed.
Of course there may be some tax implications, if a pension is cashed in, before being transferred for example, but should be normally possible .
Just an idea, maybe some flaw in the argument ?

Brie

Don't forget as well the free alternatives to POA.  Not saying these are better but just that they are free and a bit easier in some cases to put into place.

Letter of authority - A simple one page document that states "I give XXX authority to act on my behalf."   Followed by the person's signature, name, address & a date.  Providing a copy of this to most companies/authorities like HMRC, utilities, phone will allow XXX to act on the person's behalf.  Most companies will accept a scanned emailed copy.

Third person access - this is something that can be set up with each individual bank.  It allows the 3rd person to deal with anything with the bank accounts short of closing them.  It needs to be done in person with both the account holder and the 3rd P present at the branch (unless the bank is willing to send a rep to you at home or a care home).  I had this for my MiL and it meant I had a debit card which I could use for shopping or at ATMs and also that I was allowed access to her account online so that I could move money for her or pay bills.  

The other thing I would recommend is a Letter of Intent.  This can be a short or long document where an individual can outline all sorts of things they would like to be done later, perhaps when they no longer have a "voice".  Gifts to (grand)children at certain ages/occasions, expectations of selling their house, funeral plans, do not resuscitate orders.  Frankly I have no idea what place these have in the legal system in the UK officially (my experience is elsewhere) but it does allow an individual to anticipate certain things and make a statement about their expectations.  This may help anyone who has a POA to better know at a stressful time whether an aged parent might all extreme measures taken in the event of a medical emergency.  And if there's no POA in place then it may be useful to direct someone who is a complete stranger but is granted a deputyship.  Always a good idea too to provide a signed copy of this to anyone who might potentially be given POA even if that hasn't yet happened.

And a note on POAs - not UK based but my mom has POAs in place which stated that any 2 of her children can do things on her behalf.  It means that 1 of us can't take over and make decisions officially - even though that might happen in practice.  But if say a bank or hospital wasn't sure about what Bro1 said they could/should ask for one of the other siblings to confirm/agree.  And fyi - there was nothing on her POAs that stated what country we each live in.

Keep_pedalling

Albermarle said:

Pat38493 said:

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. 

Just thinking through some of the points you raise, and some of the answers.
It sounds like
1) If a couple plan to give a large gift to an adult child for a house deposit ( for example) at some later date.
2) If one  of the couple has slowly  deteriorating mental capacity ( as opposed to something sudden).

Then maybe the best course of action is to move the majority of family assets into the name of the healthy partner, or in joint accounts, whilst the mental capacity issue is still in the early stages. The healthy partner can then have the ability to make the gift directly from their own money when the time comes, and not have to worry about breaching any LPA requirements/duties by gifting from the donors assets when their condition had progressed.
Of course there may be some tax implications, if a pension is cashed in, before being transferred for example, but should be normally possible .
Just an idea, maybe some flaw in the argument ?

The main issue with that is that the transfer would be considered as deliberate deprivation of assets if residential care was required later. There are no tax issues with transfers between spouses.

Albermarle

Keep_pedalling said:

Albermarle said:

Pat38493 said:

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. 

Just thinking through some of the points you raise, and some of the answers.
It sounds like
1) If a couple plan to give a large gift to an adult child for a house deposit ( for example) at some later date.
2) If one  of the couple has slowly  deteriorating mental capacity ( as opposed to something sudden).

Then maybe the best course of action is to move the majority of family assets into the name of the healthy partner, or in joint accounts, whilst the mental capacity issue is still in the early stages. The healthy partner can then have the ability to make the gift directly from their own money when the time comes, and not have to worry about breaching any LPA requirements/duties by gifting from the donors assets when their condition had progressed.
Of course there may be some tax implications, if a pension is cashed in, before being transferred for example, but should be normally possible .
Just an idea, maybe some flaw in the argument ?

The main issue with that is that the transfer would be considered as deliberate deprivation of assets if residential care was required later. There are no tax issues with transfers between spouses.

It would only be a deprivation of assets issue, if council funding was requested. I assumed this would not be the case in my example, but it is a valid point to be aware of. 

elsien

Brie said:

Don't forget as well the free alternatives to POA.  Not saying these are better but just that they are free and a bit easier in some cases to put into place.

Letter of authority - A simple one page document that states "I give XXX authority to act on my behalf."   Followed by the person's signature, name, address & a date.  Providing a copy of this to most companies/authorities like HMRC, utilities, phone will allow XXX to act on the person's behalf.  Most companies will accept a scanned emailed copy.

Third person access - this is something that can be set up with each individual bank.  It allows the 3rd person to deal with anything with the bank accounts short of closing them.  It needs to be done in person with both the account holder and the 3rd P present at the branch (unless the bank is willing to send a rep to you at home or a care home).  I had this for my MiL and it meant I had a debit card which I could use for shopping or at ATMs and also that I was allowed access to her account online so that I could move money for her or pay bills.  

The other thing I would recommend is a Letter of Intent.  This can be a short or long document where an individual can outline all sorts of things they would like to be done later, perhaps when they no longer have a "voice".  Gifts to (grand)children at certain ages/occasions, expectations of selling their house, funeral plans, do not resuscitate orders.  Frankly I have no idea what place these have in the legal system in the UK officially (my experience is elsewhere) but it does allow an individual to anticipate certain things and make a statement about their expectations.  This may help anyone who has a POA to better know at a stressful time whether an aged parent might all extreme measures taken in the event of a medical emergency.  And if there's no POA in place then it may be useful to direct someone who is a complete stranger but is granted a deputyship.  Always a good idea too to provide a signed copy of this to anyone who might potentially be given POA even if that hasn't yet happened.

And a note on POAs - not UK based but my mom has POAs in place which stated that any 2 of her children can do things on her behalf.  It means that 1 of us can't take over and make decisions officially - even though that might happen in practice.  But if say a bank or hospital wasn't sure about what Bro1 said they could/should ask for one of the other siblings to confirm/agree.  And fyi - there was nothing on her POAs that stated what country we each live in.

These are indeed an alternative where the person still has capacity but should not still be used once the person loses capacity in those areas.  As the bank's terms and conditions clearly identify. 

Brie

elsien said:

Brie said:

Don't forget as well the free alternatives to POA.  Not saying these are better but just that they are free and a bit easier in some cases to put into place.

These are indeed an alternative where the person still has capacity but should not still be used once the person loses capacity in those areas.  As the bank's terms and conditions clearly identify. 

I would never argue with an expert!! (well I would but aren't in this case)  All I mean is that these are good things to have for the short term while other stuff is being sorted and makes life easier for some people as well.

Keep_pedalling

Brie said:

Don't forget as well the free alternatives to POA.  Not saying these are better but just that they are free and a bit easier in some cases to put into place.

Letter of authority - A simple one page document that states "I give XXX authority to act on my behalf."   Followed by the person's signature, name, address & a date.  Providing a copy of this to most companies/authorities like HMRC, utilities, phone will allow XXX to act on the person's behalf.  Most companies will accept a scanned emailed copy.

That authority will only last as long as as the donor has mental capacity to make their own decisions.

Third person access - this is something that can be set up with each individual bank.  It allows the 3rd person to deal with anything with the bank accounts short of closing them.  It needs to be done in person with both the account holder and the 3rd P present at the branch (unless the bank is willing to send a rep to you at home or a care home).  I had this for my MiL and it meant I had a debit card which I could use for shopping or at ATMs and also that I was allowed access to her account online so that I could move money for her or pay bills.  

Again, this sort of authority is only applicable if the donor still has the mental capacity.

The other thing I would recommend is a Letter of Intent.  This can be a short or long document where an individual can outline all sorts of things they would like to be done later, perhaps when they no longer have a "voice".  Gifts to (grand)children at certain ages/occasions, expectations of selling their house, funeral plans, do not resuscitate orders.  Frankly I have no idea what place these have in the legal system in the UK officially (my experience is elsewhere) but it does allow an individual to anticipate certain things and make a statement about their expectations.  This may help anyone who has a POA to better know at a stressful time whether an aged parent might all extreme measures taken in the event of a medical emergency.  And if there's no POA in place then it may be useful to direct someone who is a complete stranger but is granted a deputyship.  Always a good idea too to provide a signed copy of this to anyone who might potentially be given POA even if that hasn't yet happened.

And a note on POAs - not UK based but my mom has POAs in place which stated that any 2 of her children can do things on her behalf.  It means that 1 of us can't take over and make decisions officially - even though that might happen in practice.  But if say a bank or hospital wasn't sure about what Bro1 said they could/should ask for one of the other siblings to confirm/agree.  And fyi - there was nothing on her POAs that stated what country we each live in.

For an LPA I would recommend either giving all attorneys the ability act jointly and severally or have a primary attorney an a back-up. If attorneys have to act jointly only, then the LPA fails if one of then can no longer act for any reason.

caveman8006

A very interesting thread...but I am not sure we have reached a clear conclusion on whether Attorneys can continue regular gifts out of excess income after Donors lose mental capacity. My parents have for many years distributed all their excess income once a year, at the start of each tax year, by gifting the accumulated income in their ISA accounts equally to all their children after making a note of bank account balances to prove that all their outgoings over the preceding year have been covered by their other regular income (from pensions, bank interest, attendance allowance etc..). To be valid for IHT purposes, this distribution has to be shown to be regular and ongoing, so to cease it at the point of losing capacity could potentially make previous payments invalid. Surely, in these circumstances, an attorney could continue to make payments in the same way?

Linton

caveman8006 said:

A very interesting thread...but I am not sure we have reached a clear conclusion on whether Attorneys can continue regular gifts out of excess income after Donors lose mental capacity. My parents have for many years distributed all their excess income once a year, at the start of each tax year, by gifting the accumulated income in their ISA accounts equally to all their children after making a note of bank account balances to prove that all their outgoings over the preceding year have been covered by their other regular income (from pensions, bank interest, attendance allowance etc..). To be valid for IHT purposes, this distribution has to be shown to be regular and ongoing, so to cease it at the point of losing capacity could potentially make previous payments invalid. Surely, in these circumstances, an attorney could continue to make payments in the same way?

Attorneys can carry on making regular gifts if that was what the donor used to do and it doesn't reduce the funds necessary for the donor's welfare. I dont see why gifting all unused income should be any different nor do I see how the ceasing of gifting can retrospectively invalidate a previous gift which was legitimate at the time. However I am not a lawyer. 

See https://www.gov.uk/government/publications/giving-gifts-a-guide-for-deputies-and-attorneys

These court cases regarding gifting of all unused income may be of interest.  https://www.mandg.com/pru/adviser/en-gb/insights-events/insights-library/normal-expenditure-out-of-income-exemption

Whether you can get further guidance from the OPG I dont know.  It may be worth checking

elsien

I agree - best interests includes taking into account what the person would do if they still had capacity so in the circumstances if it’s not going to negatively financially impact on her, and there is a clear evidence that similar gifts have been given previously, it would not appear to be something that shouldn’t be done. 

Can’t comment on the tax side at all.