How to get power of attorney when person is incapacitated UK

How to get power of attorney when person is incapacitated UK

When clients enquire as to how to get a power of attorney when a person is incapacitated UK, the first thing we explore is their interpretation of the word ‘incapacitated’. Typically, such questions are posed when the subject of the enquiry is unable to act for themselves, because of some deteriorating condition or accident.

 

  • Lasting Powers of Attorney can only be obtained by those with mental capacity.
  • Implementation of these documents may take many months.
  • Applications are often rejected due to error.

 

Where ‘incapacitation’ is expected to persist for some time, the appropriate instrument may be a ‘Lasting Power of Attorney’ (‘LPA’). LPAs come in two forms: the ‘Health and Welfare Lasting’ LPA (for health decisions) and the ‘Property and Finance’ LPA (for financial decisions).

LPAs can only be created while the person giving power of attorney (the Donor) has mental capacity. ‘Incapacitated’, as used in the question above, may describe a physical impairment or a mental health event.

Mental capacity is not the same as vulnerability or mental illness. In law, a person must be assumed to have mental capacity unless it is established otherwise, moreover, all practical steps to help the person make decisions for themselves must be taken. Nobody should be assumed to lack mental capacity simply because they do something ‘silly’ or imprudent.

In broad terms, mental capacity is assessed by integrating observations of: appearance/behaviour; speech; mood; thoughts; perceptions; information processing and insight, to form a view of the individual’s capacity for: cognition, orientation and memory (Much Hon Craig Ward of Lundy 2020). If there is doubt, a professional assessment should be sought.

Mental capacity is time specific and item specific. This means that the subject need only have sufficient capacity and intention in relation the decision in hand (e.g. the instructing of a Lasting Power of Attorney), at the time they do it.  For clarity, it should not be assumed that, just because an individual lacks such capacity at one point in time, it won’t return.

If the party clearly lacks capacity e.g. they are in a coma, then an LPA is not appropriate. In such instances a deputyship might be sought through the courts.

 

How to get power of attorney when person is incapacitated UK

Assuming the Donor has mental capacity, there are other factors relating to the LPA one should understand.

Firstly, to be used, LPAs must first be approved and registered by the Office of the Public Guardian (‘OPG’). This registration process is lengthy (at time of writing around five months). The OPG charges for registering the documents (at time of writing up to £82/document i.e. £164 for both LPAs).

Secondly, the vast majority of those making LPAs use professionals to do so, and for good reason. Tens of thousands of LPA applications were rejected last year. Associated documentation and law is comparatively complex, and errors frequently made. The impact of such errors is exacerbated by the length of time it takes to register the documents. It is perfectly possible for a donor to apply for an LPA only for the OPG to notify them of an error sometime later, by which time the applicant has lost mental capacity.

LPAs are very important documents which are not straightforward to put in place. I urge you to reach out to a professional as a first step in the process of application.

If you would like to discuss Lasting Powers of Attorney with Confidence Wills visit our website now and book a free consultation (www.confidencewills.co.uk).

 

 

 

Can an executor withhold money from a beneficiary UK?

Can an executor withhold money from a beneficiary UK?

The answer to can an executor withhold money from a beneficiary UK is ‘yes’, though only for certain reasons.

  • Executors can withhold monies from beneficiaries, though not arbitrarily.
  • Beneficiaries may be unable or unwilling to receive a gift by a will.
  • The executor’s job is onerous and the time taken to execute a will may vary greatly.

Whilst, at the highest level, the role of an executor is to ensure that wishes laid out in a will are fulfilled, doing so correctly places significant duty and obligation on those appointed.

It’s important to differentiate an executor’s withholding money from a beneficiary, from an executor’s simply: ‘doing the job of an executor’.

The time it takes to execute a will may vary enormously. It is not uncommon for the process to take 9-12 months. Moreover, executors owe a statutory duty (2000 Trustee Act) to carry out their functions with due skill and care. They are required to act in the best interests of the beneficiaries of the will and to not harm the estate in any way. This demands precision, diligence and often, delicacy. Executors risk personal liability for failure to follow procedure.

The law recognises the demands placed on an executor and does not allow beneficiaries to force an executor pay out during the first 12 months of their role (the ‘executor’s year).

 

Can an executor withhold money from a beneficiary UK?

Yes, but their reasons for doing so matter!

Firstly, it’s worth noting that an executor’s withholding of money from a beneficiary may arise from the beneficiary’s inability to receive it, or a desire on the latter’s part not to receive it.

Minors are unable to ‘give receipt’ for gifts by a will. In such a situation, executors may be required to retain a minor’s gift (e.g. under a bereaved minor’s trust) until they come of age. Some wills make provision for ‘parental receipt’, whereby an executor may accept receipt from the parent of the intended beneficiary, though this is at the discretion of the executor.

An executor may not force a gift on a beneficiary and so may withhold it. Beneficiaries may agree to refuse gifts by a will, where they wish to so vary for e.g. tax efficiency.

Other scenarios in which money might be withheld from beneficiaries, are limited but include:

  1. Situations in which unspecified creditors come forward. In such cases, settlement of the will may be delayed by up to 6 months as this situation is resolved.

 

  1. Where there are safety concerns. In the case of a child, these are likely to be around parental issues, in which case settlement may be withheld until the child reaches 18.

 

  1. In the case of an adult, concerns over issues such as addiction or mental capacity may lead to a beneficiary’s gift passing into a trust established for their protection.

The role of an executor is potentially complex and must be undertaken with care. If you’d like to discuss any of the issues raised, please feel free to visit Confidence Wills’ website to book a free consultation (www.confidencewills.co.uk).

Trusts Exempt from Inheritance Tax

Trusts Exempt from Inheritance Tax

When asked ‘are trusts exempt from inheritance tax (“IHT”)’ my answer is ‘on the whole, no, but it’s complex and you should seek advice’.

  • Placing assets into a trust may attract inheritance tax.
  • Trusts are typically subject to anniversary and exit charges.
  • Trusts may be useful in preserving tax reliefs or for skipping generations.

Inheritance tax (“IHT”) is a wealth tax, usually (though not always) paid on death. It arises when wealth changes hands (nb. this includes ‘undervalue gifts’ as well as transfers for which there is no consideration). Gifts given, in life, up to 7 years before death, may attract IHT.

Trusts may be made either in life time or via a will. In the latter case, the trust comes into existence only on death.

For an insight into tax treatment, consider the example of a discretionary trust created in lifetime: John pays £425,000 into a discretionary trust for his grandson, IHT is payable immediately (at a rate of 20%) and is calculated thus: £425,000 – £325,000 (exemption/nil rate band) = £100,000 (the taxable amount). £100,000 x 20% = £20,000. Thus, £20,000 is payable in tax on entry to the trust. When John then dies (in the same year – for simplicity), the IHT liability (40%) – minus tax already paid – is due i.e. an additional £20,000 in tax (total tax paid £40,000). Anniversary charges (of up to 6%) and exit charges may also be payable over the life of the trust.

The above notwithstanding, there are certainly situations in which trusts may be useful for tax planing (advice should be obtained). By way of example where a settlor (the person creating the trust), wishes their wealth to be preserved across generations. It is possible for a trust to persist for 125 years, IHT is payable on transfer of wealth, so by ‘leaving’ property within the trust, transfer taxes may be avoided (though anniversary and exit charges may not).

Trusts may also be attractive where one seeks to preserve a tax relief. Business and agricultural assets may attract relief (of up to 100%) from IHT. Where a settlor wishes future generations to benefit, such assets may be left to a trust, in case e.g. future generations do not wish to operate the business, causing assets to lose their IHT relief. This situation should be treated with caution since sale of a business or associated asset before the 10 year anniversary of trust may lead to exit charges arising.

 

 

Trusts Exempt from Inheritance Tax

Certain trusts are ‘exempt’ from IHT, however, this is not the same as no IHT ‘s being paid. IHT still arises at the time of transfer to the trust and exit fees may still apply. Such trust include: Interest in possession trusts and situations in which assets are set aside for disabled or young people (minors or those aged 18-25).

Whilst this article doesn’t offer advice on tax planning, we strongly recommend that it is sought. The descriptions above are necessarily simplified and non-exhaustive. The field is complex and an integrated approach to IHT planning is important. Contact us now via www.confidencewills.co.uk for a no-obligation chat.

 

 

Do you have to register a will in the UK?

Do you have to register a will in the UK

Do you have to register a will in the UK?

A better question than: “do you have to register a will in the UK?” (a will may be legally valid whether registered or not), might be: “should you register your will?”. Registration supports your executors in not only finding your will, but in ensuring that it’s the most recent version.

 

  • An unregistered will may be legally valid.
  • Registration of a will supports the identification of ‘up-to-date’ documents.
  • Executors can be held personally liable for improperly managing the deceased’s affairs.

 

For the avoidance of doubt, we mean by: ‘registering the will’, the uploading of certain information onto the National Will Register.

When ‘registered’, information including: details of the testator (the will’s creator), witness/executor information and the location of the document, is stored on a central and searchable database.

At time of registration, the information above is uploaded to the system (a charge is made by the register for this – £30 – at time of writing), and a certificate issued. During probate the register may then be searched, by those administering the deceased’s estate.

For the avoidance of doubt, the presence of a particular will on the National Will Register is confidential, until the testator’s death, at which time only those directly involved with the document are able to search for it.

 

Do you have to register a will in the UK? Why register?

The primary reason to register a will is to ensure that it’s located on your demise, by executors or administrators.

 

 

A search of the register might alert concerned parties, to the existence of a will (of which they weren’t aware) on your death. Crucially, the register might also alert executors to a more recent document than that already identified. It is common for clients to make multiple, small variations to their wills through life. Executors must be confident that they are working the most recent version.

Many register their wills in order to provide their executors with peace of mind (at a potentially difficult time). The executor of a will has a duty to ensure that a testator’s final wishes are properly administered. Executors risk ­­personal liability, to any that lose out, as a consequence of their failing in this duty.

Under Section 27 of the Trustee Act (1925) executors are able to protect themselves from claims that creditors/beneficiaries have not been notified, by taking various steps. These include, but are not limited to: placing notices in The Gazette and setting out a period of 2 months during which interested parties may submit a claim.

These steps, however, do not guard against administering the wrong will altogether! The observation below, made by Tom Dumont (Barrister) speaking to The Gazette, summarises the point well.

“…a Section 27 notice does not remove the requirement to do a will search, the two procedures serve different purposes, but work effectively and comprehensively to guard against risk. They represent a best practice approach to managing risk.”

We believe registration extremely important, if you’d like to know more about the registration of wills, visit us now at www.confidencewills.co.uk to book a free consultation.