Blogs Norfolk Norwich Blogs

Handling money under a Power of Attorney

Written by Almary Green

It’s Dementia Awareness Week and at Almary Green our thoughts have turned to the many families out there where family members have been granted Lasting Power Of Attorney for relatives living with dementia who are no longer able to manage their finances themselves.

Acting under a Power of Attorney does have its responsibilities and they extend beyond paying the bills.  If your relative has financial assets, then you have a duty to ensure that any action you take on their behalf in respect of those assets is both in their best interests and reflects their probable wishes.

 Investments

Let’s look at investments:  when you make decisions about where you should be investing your relative’s money, you must be able to prove that you have done so wisely, if ever challenged.  In practice, this normally means taking independent advice if your relative has significant assets to invest.  Importantly, you should ensure any investments you make are approved by the Financial Conduct Authority and so are covered by the Financial Services Compensation Scheme (FSCS) if anything were to go wrong.

If your relative has a short life expectancy, this must normally be reflected in your investment strategy, which usually means in practice that you should concentrate on cash investments.  Risk is another factor:  as their representative, you cannot be seen to be playing fast and loose with your relative’s money so you should err on the side of caution.

Your primary focus with a Power of Attorney is to ensure that you meet your relative’s present and future need for income and for capital.  Their well-being is your responsibility so it is important to ensure that while the estate can afford it, you are providing your relative with a standard of care consistent with what they might expect to receive.

Remember that if your relative is living with dementia, their physical health may be reasonably strong.  You should, therefore, ensure that your management of their finances is on the basis of providing for their long-term care.  Financial plans such as Immediate Care Plans can be used to ensure that care can be funded for the life of your relative.

Gifts

Having taken on the responsibility for your relative’s finances, you are allowed to make gifts on their behalf.  However, these must be “reasonable” – ie they must be what you might have expected your relative to make if he or she was still able to make financial decisions.  Typically, gifts would include Christmas, birthday and wedding presents to the people to whom your relative would normally give presents.  In addition, you can make gifts to charities that your relative has regularly supported in the past.

Careful Records

Your actions as your relative’s Attorney can potentially be challenged by the Office of the Public Guardian or the Court of Protection.  You should keep careful records of everything you do on their behalf and keep their finances completely separate from your own.

If you spend money – on travel, postage etc – in the process of acting as an Attorney, you can claim expenses from your relative’s finances, but do ensure you keep all receipts and invoice your relative accordingly.

Selling the Relative’s Home

If you need to sell your relative’s home or other property – to pay for care fees, for example – then you can do so, provided it is in their best interests.  However, you should contact the Office of the Public Guardian if you want to sell it to a family member or you plan to sell it below its market value or give it away.

Managing Inheritance Tax Liabilities

As your relative’s Attorney, you are allowed to manage their estate to mitigate Inheritance Tax (IHT), provided that you don’t jeopardise their standard of living and care.

IHT may be payable on your relative’s estate if the value of the estate on death exceeds his or her Nil Rate Band – the IHT-free threshold.  The amount of Nil Rate Band that your relative is allocated will depend on his or her circumstances.  The basic Nil Rate is £325,000 per person but spouses can pass their estate and unused Nil Rate Band on to each other free of IHT, giving a total potential Nil Rate Band for the surviving partner of £650,000.  Since April 2017, there is an additional slice of Nil Rate Band that can be added in respect of the family home if it is left to children or grandchildren.

Advice from Almary Green

Our Later Life specialists can help you ensure that you fulfil your obligations under the Power of Attorney and that your relative’s finances are carefully managed to protect his or her best interests.  If you would like to know more, contact us at enquiries@almarygreen.com or call us on 01603 706740.

 

 

Have you got a Power of Attorney?  Tell us your experience on our forum here.

About the author

Almary Green

Almary Green Investments Ltd is an award winning firm of independent financial advisers helping individuals and businesses throughout East Anglia and beyond. We’re Chartered Financial Planners – the Gold Standard for the industry – and in November 2014 we were named Chartered Financial Planners of the Year 2014 by the industry’s professional body, the Personal Finance Society.