Can Deputies Or Attorneys Use Powers Not Covered By The Deputyship Order Or / Lasting Power of Attorney?
The simple answer to this question is a ‘No’. The general authorisation in a Deputyship Order allows the Deputy general powers to administer P’s affairs including the ability to access bank accounts, manage investments and possibly include the ability to purchase and sell P’s property (although the Court require further information before authorising this now).
Most people wish to reduce the inheritance tax (IHT) payable on their estates if they can. The most common method to do this is to make lifetime gifts of surplus capital. If you survive 7 years from the date of the gift, the amount of IHT payable on your death is reduced.
The Deputyship order, or LPA, whilst useful does not allow the deputy / attorney to make large lifetime gifts in order to save IHT. The Deputy/Attorney has to ask the court for approval to do this and has to demonstrate to the Court why this is in P’s best interests.
A prudent person who has surplus capital to their needs would seek inheritance tax advice and act accordingly, however, a person who lacks capacity is unable to do this and so it falls to the Deputy/Attorney to consider whether P would have taken advice and acted on it. If they reach the conclusion that P would have wanted to take steps to reduce the IHT payable on their death, then the Deputy/Attorney may make an application to the Court for authority to make lifetime gifts to reduce surplus capital. However, the Deputy/Attorney must satisfy the court that this would have been P’s wish, and this request is not driven solely by those who may benefit during P’s lifetime from the gift.
Lasting Power of Attorney Example
I represented four siblings. One of their parents had died and the other parent (P) had inherited a large estate but had lost capacity. P’s property and financial affairs were administered by an Attorney who was one of her children. When calculating how much money P needed, given her life expectancy and expenditure, it was clear that P had surplus capital and that on her death the value of her estate would be over £2 million and would therefore result in a large sum being paid in inheritance tax.IHT.
P’s will was simple. She had left the entirety of her estate to her four children equally. All four children had a good relationship with each other and P. They approached me and asked whether the Court would authorise a gift of £250,000 to each child during P’s lifetime in an attempt to start the seven year clock and reduce the IHT liability on the estate.
The court have to be satisfied that the gifts are affordable and that in P’s best interests. The court has regard to P’s wishes and feelings when she had capacity.
The application was made and the court approved the lifetime gifts. The court was satisfied that P was left with sufficient funds to meet her needs for the rest of her life.
The application was strengthened by the fact that P had sought IHT tax advice previously when she had capacity although she had not acted on the advice. This showed that P did have a concern over the level of IHT payable on her estate and had taken steps to investigate her options to reduce this when she had capacity. This was important evidence of her wishes and feelings.
If you would like to seek professional and legal advice on Deputyships, please contact our Deputyship solicitors to discuss further your personal circumstances, call us today on 0808 271 9413 or request a call back at your convenience.