Limits Of Lasting Power of Attorney Abilities

Some advice please folks?

My mum is a Health and Wealth LPA for my dad who has dementia and Alzheimer's diagnoses but no assessment as yet of his Mental Capacity. Myself and one of my sisters are also Health and Wealth LPAs for both parents.

My dad has 2 pensions which make him a 40% tax payer.  My mum is a non-taxpayer.

I have suggested to my mum that moving cash from his accounts, held both jointly by them and in his name only, would reduce his tax burden and use up mum's currently unused personal allowance. I view this as pretty standard tax-mitigation within a marriage and something I do routinely. There are also pressing Probate reasons why she would need to move money from his account as he is waning fast.

My (unmarried) sister works for a lawyer and is obsessed with the law (in a bad way) and  states emphatically that an LPA cannot move money from a 'donor' that will benefit the LPA, whether a wife or not. I have suggested that this limitation with the LPA's abilities is overridden by the fact that they are married and that, even if it's cash in accounts in my dad's name only, then it's viewed as shared assets within the marriage and she can do as she pleases with them. The legal statements that I have seen appear to only apply to cash gifts made from a donor's account that financially benefit someone else than the donor.  My contention to my sister is that my moving money to my mother's name is in his benefit as it is tax-efficient and reduces his tax burden which will enable him to pay his care fees more easily.

Before I go down the route of costly and formal legal advice I would appreciate any guidance from folks who have either been down this route or who are more confident of the LPA's limitations. Hopefully this could resolve an awkward family impasse and save my parents some tax.

Many thanks.

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Comments

  • Brie
    Brie Posts: 9,211
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    Does your dad have mom's tax exemption - the married tax exemption transfer thing - sorry can't remember the official name.  That would certainly be in his best interest if it's not already in place.

    And what about adding her to his bank accounts so they are joint which would certainly make things easier when dealing with the bank and may also help with the tax as well.  

    I'm wondering what would happen if you/your mom proceeded with what you are suggesting.  Would anyone care or complain?  Including your sister??  
    "Never retract, never explain, never apologise; get things done and let them howl.”
  • Flugelhorn
    Flugelhorn Posts: 5,404
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    Can I just check what you have: there are 2 LPA's

    Health and Welfare  
    Property and financial affairs 

    does she have both?
  • sheramber
    sheramber Posts: 18,608
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    Brie said:
    Does your dad have mom's tax exemption - the married tax exemption transfer thing - sorry can't remember the official name.  That would certainly be in his best interest if it's not already in place.

    And what about adding her to his bank accounts so they are joint which would certainly make things easier when dealing with the bank and may also help with the tax as well.  

    I'm wondering what would happen if you/your mom proceeded with what you are suggesting.  Would anyone care or complain?  Including your sister??  
    You cannot benefit from marriage tax allowance if you are higher rte tax payer so , in this case, it is not apporpriate.

    Does you mother contribute any money to the joint account?  If so, she could transfer that money out to her own account and not deposit any more in it.

    Do you use that account for all household bills/ expenses ?

    No doubt you transfer money with your spouses agreement. The problem in this case is would your mother be acting with your dad's agreement?

    Having less money in his account would only reduce his tax burden on the tax he pays on his interest.

    How would moving the money, thus reducing hia capital,  allow him to pay for his care more easily?

    Moving money out of the account to another name may be considered deprivation of assets by LA if he went into care and wanted them to subsidise the care. 

    Maybe you could move the money to an ISA in his name,  which would be non taxable.
  • Keep_pedalling
    Keep_pedalling Posts: 16,127
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    Your sister is correct, doing this would be way beyond your authority and would be considered as deliberate deprivation of assets should he needs to be financially assessed for care costs. The fact that they are married is irrelevant.

    I would suggest that you actually split the joint savings into individual accounts (50/50) to make life easier down the line and move as much of his savings into ISAs as you can. If you go ahead and do this against your sisters advice she you could have you removed as an attorney and you could find yourself in facing significant costs.
  • BikingBud
    BikingBud Posts: 1,642
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    Whilst I get that taking funds from the "father only" account might be considered not in his interests and therefore an issue why is using/taking all monies, irrespective of origin, from a joint account forbidden?

    As many relationships fail it has been frequently the case where the joint account has been cleared by one party, all perfectly legal, so why would this be different?

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  • Keep_pedalling
    Keep_pedalling Posts: 16,127
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    BikingBud said:
    Whilst I get that taking funds from the "father only" account might be considered not in his interests and therefore an issue why is using/taking all monies, irrespective of origin, from a joint account forbidden?

    As many relationships fail it has been frequently the case where the joint account has been cleared by one party, all perfectly legal, so why would this be different?

    I don’t consider someone clearing out a joint account when a relationship has failed as being perfectly legal unless the other party has agreed to split the money that way. It would be even worse where one party has lost mental capacity and can’t do anything about it.  
  • tooldle
    tooldle Posts: 1,464
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    edited 6 October 2023 at 6:28PM
    Holders of LPA’s must act in the donors best interests. In your father’s condition it is not in his best interest to ‘give away’ 50% of jointly held assets. Your sister is correct.
    if you think Dad may have capacity, try for an LPA via a solicitor to be certain the capacity question is resolved. I suggest this as you appear not to have authority to be giving such advice.
  • lr1277
    lr1277 Posts: 1,613
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    My impression (which might be wrong) is that if the money is in a joint account, the money can be taken out by either party for whatever purpose. Say a couple who are both mentally competent have a joint current account. Say one partner takes out money for a holiday for themselves, that is not a problem legally, even if both partners contributed that money.
    On the budgeting and banking board, there are threads about ex-partners clearing out bank accounts and the remaining partner can do nothing about it till the ex-partner is removed from the account.
    Does the LPA affect who takes money out of a joint account and its intended usage?

    With the issue of the Finance LPA, is it registered with the financial institutions which hold your dad's accounts? If not, your mum will/should not be able to move money out of your dad's accounts. As an example, both my parents had joint and sole accounts with Nationwide. Mum had LPA on dad's financial affairs but the LPA was not registered with Natiowide. Until it was, Nationwide would not allow mum to move any money out of dad's accounts. Even though they had joint accounts at the Nationwide. And yes if the LPA si registered with the financial instituion and money is moved out of a sole account, it has to benefit the donor.
  • Thanks for the responses folks.

    My poorly worded initial post seems to be creating some confusion, so to clarify:

    - we (sister and I) are both types of LPA for both parents. Mum is both types of LPA for dad.

    - this is a tax saving measure only. 

    - There is no intention of depriving my dad of his cash reserves, just moving it into my mother’s name to pay less tax on the interest and to use her Personal Allowance of £12570.

    - The money saved will be part of the significant care fees about to hit the family finances. 

    -Their cash accounts are pooled for family expenses and commitments so there could be no subsequent accusations of trying to deprive him financially or benefit anyone else but him and mum, a couple married for 65 years.

    - They live together and will do so until his or her passing.

    - As I see it one of the LPA’s prime fiduciary duties is to only act in the donor’s (my dad’s) best interests. By legally reducing the tax bill on the interest of (mostly) jointly held-accounts of the 2 of them this suggestion improves his financial position.

    - I am at the research stage of giving advice. None of this is a fait accompli and I would only go ahead once I was firmly assured that what I was suggesting was entirely within the law and more importantly the best interests of my dad, and therefore my mum.

    - i have spoken to a tax accountant who stated that my suggestion was entirely appropriate and legal but im not sure whether they got the LPA connotations of what I was asking.

    - if it is the legal minefield it appears to be then we will simply engage with the family solicitor to enact it through the legal system. Unfortunately that will probably be a significant portion of the tax saving. 

    - my father is not truly capable of assenting to make a financial decision like this.

    - if there’s any doubt I will write to the Office of the Public Guardian and update their response here.

    Thanks for your input and advice. 
  • Keep_pedalling
    Keep_pedalling Posts: 16,127
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    I see exactly where you are coming from and it does make sense to reduce his IT liability. I think as long as this is properly documented to show that the funds, while your father is alive, are for his exclusive use then this should not be a problem (if you can finally get you sister on board). I suspect you will be in a position to privately fund any care he needs, but if the LA are involved it will be important to declare these funds in any financial assessment.

    The amount that your mother can earn without paying IT is actually £17,570 because she can make full use of the savings starting rate.

    https://www.gov.uk/apply-tax-free-interest-on-savings

    In the mean time maximise any tax free savings available to your father if not already used, so if he has not used his ISA allowance this year and does not hold  the maximum amount allowed in premium bonds to those up.

    I know how difficult it is dealing with a parent with dementia and it will be more difficult with a joint attorney you are at loggerheads with, so try to bring her round calmly and involve her in all the conversations you have with any professional help you go to.

    One other possibility to consider, if he has substantial savings is a care annuity, where a single upfront payment covers all on going care costs. This of cause would use up a good chuck of his savings and reduce his tax liability. If this looks an attractive option then I would recommend going through an IFA to obtain the best deal as they have access to provides the general public doesn’t.

    https://ukcareguide.co.uk/immediate-care-annuity/

    Good luck.
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