Types of Power of Attorney UK

Types of Power of Attorney UK

There are four legal instruments that might be said to fall into this category (“Types of Power of Attorney UK”).

In the context of estate planning, these are:

  • General Power of Attorney. A short document requiring no special registration.
  • Health and Welfare Lasting Power of Attorney. A document issued by the Office of the Public Guardian, permitting attorneys to make decisions around health and care.
  • Property and Finance Lasting Power of Attorney. Also issued by the Office of the Public Guardian and dealing with financial matters.
  • Enduring Power of Attorney. A forerunner of the Lasting Power of Attorney.

 

Before going on I’d like to share a couple of important definitions. A ‘Donor’ is the person making the power of attorney i.e. the one giving the power, to act on their behalf, to another. An ‘Attorney’ is the one who acts on the donor’s behalf, under powers conferred by a Power of Attorney.

Selection of the appropriate document will depend on its intended application. Where a straightforward instrument, allowing an attorney to act on a donor’s behalf for practical reasons, is required e.g. the donor is going away for a period of time and needs someone to sign documents for them on short notice, a general power of attorney may suffice. This is a quick document to prepare. Critically, however, it can ONLY be applied where the donor has mental capacity, so is of limited use for long term planning.

 

Types of Power of Attorney UK: Mental Capacity

Where attorneys’ powers are to persist after the donor has lost mental capacity, a Lasting Power of Attorney should be made.

The Property and Finance Lasting Power of Attorney, grants to attorneys, powers to act in financial matters for the donor. Critically (if so drafted), it may be used either BEFORE the donor has lost mental capacity or afterwards.

The Health and Welfare Power of attorney allows attorneys to make decisions around health and care and can ONLY be used when the donor has lost mental capacity. This document may deal with decisions such as ongoing life support.

The Enduring Power of Attorney confers similar powers to those laid out in the Property and Finance Lasting Power of Attorney. This document, whilst still in circulation, is no longer available de novo, with no new Enduring Powers of Attorney issued after 2007.

 

The process of putting a Lasting Power of Attorney in place is somewhat laborious (albeit streamlining steps have been taken), and may take 3-6 months to complete (including registration and issue of the document by the Office of the Public Guardian).

Lasting Power of Attorney application forms must be completed correctly (there were more than 20,000 documents rejected last year). A professional will charge a few hundred pounds to draft these on your behalf, we believe this money well spent.

If a donor loses mental capacity BEFORE applying for a Lasting Power of Attorney, put simply, it is too late. In this case, a ‘Deputyship’ must be applied for through the Court of Protection. This process may take more than a year (during which time assets may be frozen) and may cost several thousand pounds (ongoing fees also apply) – it is estimated that the cost of applying for a deputyship is twelve-fold greater, than that of applying for a Lasting Power of Attorney professionally.

There is no next of kin in English law. If you have someone who you trust to perform the role, do not delay in creating a Lasting Power of Attorney, far too few people have them!

If you’d like to know more, please visit our website (www.confidencewills.co.uk) and book a free consultation now.

How much does a discretionary trust will cost?

How much does a discretionary trust will cost?

How much does a discretionary trust will cost?

Answers to the question “how much does a discretionary will cost?” may range from: “a few hundred pounds” to “the right to live in a family home”. Put another way, whilst there are certainly reasons to consider use of these instruments, there are reasons for caution too and alternatives which might be preferable.

 

  • A will plus a discretionary trust may cost in the £4-700 range
  • Caution should be exercised with discretionary trusts, particularly in the light of changes to tax law.
  • Beneficiaries do NOT have an absolute right to assets held in a discretionary trust.

 

A trust is a means by which an asset is legally held by one or more parties (the trustees), for the benefit of one or more others (the beneficiaries). Thus, legal and beneficial ownership are separated.

Named beneficiaries’ rights to the contents of a discretionary trust are entirely at the discretion of the trustees.

This point really can’t be overemphasised. Beneficiaries of a discretionary trust have no legal right to anything held by that trust, only the hope of so attaining. Moreover, one cannot usually direct trustees’ actions via a will. Guidance may be given to trustees by letters of wishes; however, these are necessarily, legally non-binding, and trustees need not disclose this guidance to beneficiaries, nor need they explain their reasons for making decisions.

This is quite-different to other will based trusts, such as Life Interest Trusts or Protective Property Trusts, by which beneficiaries have certain absolute rights in law, for instance, that to live in a house, or to receive income from a portfolio of investments.

 

How much does a discretionary trust will cost? Cost v benefit.

From a taxation perspective, the discretionary trust is treated, as an entity, completely independent of any of its beneficiaries. As such, it is not included in any future inheritance tax (“IHT”) calculation undertaken with respect to those beneficiaries. Since such trusts may persist for up to 125 years, this presents an opportunity for IHT planning across generations.

Treatment of the discretionary trust as a completely separate entity, however, means that certain (comparatively recent) IHT exemptions, such as the Resident’s Nil Rate Band and the Spousal Exemption, may be lost when such a trust is used.

From a non-tax perspective, discretionary trusts, offer the potential for trustees to respond to the changing situation and needs of a beneficiary on an ongoing basis and through life (as opposed to a bereaved minor/young person’s trust which must be wound up when a beneficiary reaches a certain age). By extension, they may be useful where beneficiaries might be ‘harmed’ by receipt of a significant amount of money e.g. in cases of drug or alcohol abuse. They may further be useful in protecting beneficiaries from loss in divorce or bankruptcy.

Assets in a discretionary trust fund are not taken into account for means testing with respect to benefits or care home fees, so they offer a means by which to preserve such benefits or to protect them from seizure by local authorities. In the case of care home fees, and in the context of ‘spousal exemption’, a protective property trust might be preferable, however.

If you’d like to discuss any of the issues raised, contact us via www.confidencewills.co.uk for a no obligation chat.

 

 

 

 

 

How to get power of attorney for an elderly parent with dementia?

How to get power of attorney for an elderly parent with dementia

If you find yourself asking questions like “how to get power of attorney for elderly parent with dementia?” it may already be too late! Swift action may prove critical to the well being of your loved one. Get in touch with Confidence Wills (www.confidencewills.co.uk) or an alternative advisor IMMEDIATELY if you are in this position!

 

  • You can only create a Lasting Power of Attorney if you have mental capacity.
  • The alternative to a Lasting Power of Attorney is a ‘Deputyship’.
  • Mental capacity in dementia patients often fluctuates.

 

The term ‘Power of Attorney’, in the context of the above question, refers to documents called ‘Lasting Powers of Attorney’.

Briefly, there are two types of Lasting Power of Attorney (“LPA”): the ‘Health and Welfare’ LPA and the ‘Property and financial affairs’ LPA. Both allow a ‘Donor’ to appoint ‘Attorneys’ to act on their behalf should they lose mental capacity.

The ‘Property and Financial Affairs’ LPA permits your attorneys to make decisions about the management of your money and property. The ‘Health and Welfare’ LPA permits your attorney to e.g. make decisions around ‘life sustaining treatments’ or to give consents for medical interventions.

 

How to get power of attorney for elderly parent with dementia? Mental Capacity is Key!

Lasting Powers of Attorney can only be attained for those who have mental capacity at time of application.

Where a party lacks mental capacity a ‘Deputyship’ must be sought, via the courts. Pursuit of a deputyship is much more protracted, costly and onerous (in terms of monitoring/reporting requirements) than an LPA.

If there is doubt about mental capacity you should seek an assessment from a professional assessor. An assessor will typically gauge mental capacity via testing.

Should the assessor feel the applicant to have mental capacity they will so state on the client’s LPA application, however, if they do not, they will often instead complete a ‘COP3’ form, stating a lack of capacity and permitting pursuit of Deputyship through the courts.

Notwithstanding the role of professional assessors, there are certain points regarding mental capacity, in the context of LPAs, which it is important for the loved ones of those seeking these valuable documents, to understand.

  1. Capacity is time specific and may fluctuate. Different types of dementia tend to be associated with different patterns of lucidity. Vascular dementia may feature weeks of clarity on a patient’s part, interspersed with confusion, Alzheimer’s patients’ cognitive status may rise and decline on a 24 hour cycle. The time of engagement, with respect to completion of any LPA application, may be critical.

 

  1. Capacity is task specific. Giving an instruction to make an LPA is a single, time bound event. The applicant need only have capacity whilst giving the instruction. Further, said capacity need only be in relation to issues falling within the scope of the instruction.

 

  1. The use of a professional (such as Confidence Wills) is strongly advised. Registration of an LPA may take months, an error in the application may take weeks or months to detect and correct, by which time the applicant may have deteriorated (more than 20,000 LPA applications were rejected last year). Moreover, with respect to mental capacity, it’s not unknown for a professional’s contemporaneous records to override post-hoc medical opinions (e.g. Burgess v Hawes 2013).

To re-state, if a relative has suspected dementia and lacks a Lasting Power of Attorney, act now!  Contact us via www.confidencewills.co.uk for a no obligation chat.

 

Why do I need a last will and testament?

Why do I need a last will and testament?

The answer to the question: “why do I need a last will and testament?” may be as broad as: “because there are people I want to care for when I die”. The implications of failing to consider the question, however, maybe complex and far reaching.

  • To ensure your estate passes to those you care most about.
  • To mitigate financial risks from tax or care fees.
  • To reduce conflict and ensure your children are cared for by trusted parties.

Making a will is something that nobody wants to think about yet the lack of one, when the time comes, can be catastrophic! Without one, people expose themselves, unnecessarily, to risks including (but not limited to): assets passing to the wrong people (or even the Crown), their children entering care (in situations where no guardian has been appointed), residential care fee payment, unnecessary taxation and ultimately failure to look after their loved ones.

It is often only in a moment of crisis (will writing enquiries more than doubled in periods during the Covid crisis) that people are moved to act, this may be too late. It’s thought that around thirty million people in the UK lack an up-to-date document. I urge you to act now to protect those you love.

 

Why do I need a last will and testament? Consider the numbers!

40% is the current UK Inheritance Tax rate, payable on death. Exemptions (more accurately nil rate bandings) are not applied automatically, are directly affected by the manner in which gifts are given in a will and may be significantly impaired in the absence of a properly drafted document.

£41,600 is the average annual cost of nursing home care, payable in life. Simple and inexpensive changes to a will, can protect your property from seizure by local authorities for payment of care fees. Similar mechanisms can be used to prevent your property’s being lost to a new family, should your partner or spouse remarry after death.

£48 million was seized by the Crown under intestacy rules last year. If there is no will, intestacy law applies, seeking to distribute your estate amongst family members. Such law includes a comparatively narrow group of direct relations. If none can be identified, assets may pass to the Crown.

£150,000 is the average cost of a court challenge to a will and 8,000 people attempted to block a will in 2019. The reality is that people are becoming increasingly litigious when they feel poorly treated by a will. Challenges tend to surge in times of economic hardship such as recessions. Proper advice can greatly reduce the risk of challenge.

Something that is perhaps overlooked when considering the impact of lack of a will, is the potential for conflict to arise in its absence. I hold that around half of the benefits of having a will relate to its capacity to reduce friction between those who love you after you pass.

No-one feels ‘normal’ when recently bereaved and yet it is often onto the most bewildered and dislocated, that the administrative burden of distributing property falls. Should argument erupt over who should receive certain (often comparatively low value) items, antagonists tend to view one another as almost infinitely ‘small minded’ in the context of their recent loss. I’ve known families to fracture over items as trivial as a clock or some jewellery.

If you have nothing in place, I encourage you to get in touch for a no obligation conversation. You’ve nothing to lose and everything to gain. Book now at www.confidencewills.co.uk