1. Breakfast Seminar Wednesday 22 June 2016
Private Client Update : Lasting Powers of Attorney, the new Residence Nil Rate & gifting in the Court of Protection
Breakfast Seminar
Wednesday 22 June 2016

2. Powers of Attorney
There are a number of different types. These are the main ones that you will come across:-
Enduring Powers of Attorney
Lasting Powers of Attorney
General Powers of Attorney

3. Enduring Powers of Attorney
It is not possible to put new Enduring Powers of Attorney in place any more.
This doesn’t mean that the old Enduring Power of Attorney are invalid
What were these used for? They are limited to financial affairs. They can be used during the Donor’s lifetime but watch out, if the donor is lacking or is starting to lose capacity then the EPA needs to be registered. The attorney has a duty to get it registered.

4. Lasting Powers of Attorney
There are two different types - Health and Welfare LPA, Property & Financial Affairs LPA.
The property & Financial Affairs LPA is quite similar to the old EPA. It focuses on financial matters.
Health and Welfare LPAs – these are focused more on welfare related decisions such as diet, dress, care, which nursing home, visitors….

5. Terms Donor – the person who put the LPA in place
Attorney - the person or people appointed to act for the donor.
Certificate provider – the person who confirms the Donor has capacity to put the LPA in place.
Persons to be notified – the Donor can choose if they want any people to be notified of registration

6. LPAs - registration
LPAs cannot be used until they have been registered with an organisation called the Office of the Public Guardian (OPG).
With the financial one, the Donor decides if it can be used immediately after registration or only after registration and if they lack capacity.
The Health & Welfare LPA cannot be used until it has been registered and the Donor has lost capacity to make decisions.

7. Financial LPAs – watch out for certain pitfalls
Is there more than one attorney appointed and how are they appointed to act
Replacement attorneys
Capacity and an LPA. At what point do you stop taking instructions from your Client and revert to the LPA?
Discretionary Management Fund and attorneys having the authority to invest. See OPG guidance note of 7 September 2015 (relevant extract attached). Suggested wording to include in an LPA where a donor wishes to authorise his attorney(s) to delegate investment decisions. Is an application to the Court of Protection required?

9. New Residence Nil Rate Band
As we know, the current Nil Rate Band is £325,000 for a single person, up to a maximum of £650,000 for a married couple
No plans to change the current Nil Rate Band until the end of tax year 2020/21 at the earliest
New main residence Nil Rate Band to apply to deaths on or after 6 April 2017

10. New Residence Nil Rate Band
This will increase as follows:
£100,000 in 2017/18
£125,000 in 2018/19
£150,000 in 2019/20
£175,000 in 2020/21
From then on to increase in line with the Consumer Prices Index
The new residence Nil Rate Band is transferrable

11. Key Points to Bear in Mind
The extra exemption is only available where there is a residence that is “closely inherited”
The asset has to pass to a lineal descendant (or to a spouse/civil partner of a lineal descendant or to the surviving spouse or civil partner if a lineal descendant is pre-deceased and they’ve not remarried)
Definition of child includes step children and foster children

12. Wills ought to be reviewed to check for a contingent interest
Property left to certain limited types of settlement will be treated as being inherited ie property held for a lineal descendant on IPDI trusts, Section 89 trusts or bereaved minor or bereaved young person’s trust. It does not include a discretionary trust even if all of the potential beneficiaries are lineal descendants

13. Residence?
A dwelling house that has been the deceased’s residence at some time during ownership
No requirement to be a main residence, holiday home will qualify
Buy to let will not qualify

14. Downsizing Still in draft Complex calculations apply
It appears that there will be a residence nil rate band if the deceased downsized during their lifetime, or even sold property upon going into care provided assets of an equivalent value are given to direct descendants
Downsizing has to be after 8 July 2015
Includes disposing of a part of a property
See guidance in packs!

15. Residence Nil Rate Band not available for all
Where there is an estate worth over £2million the exemption is withdrawn by £1 for every £2 that the value of the estate exceeds the taper threshold
ie, an individual with an estate worth £2.2million or more does not get the benefit of the residence nil rate band

16. “Estate” means assets less liabilities
Lifetime gifts are ignored, but so are exemptions and reliefs
example:
A wealthy individual leaves his entire estate worth £5million to his children. £4million attracts BPR but the relief is ignored. His estate exceeds the taper threshold to the extent that no residence nil rate band is available.
However, if on his death bed he gives away £4million his estate is reduced to £1million and the full residence nil rate band is available.

17. Unused residence nil rate band can be transferred to a surviving spouse or civil partner. If the surviving spouse dies after 6 April 2017, the deceased’s spouse residence nil rate band can be transferred to be claimed on second death
Gifts to lineal descendants can be effective via a Deed of Variation.

18. Gifting & the Court of Protection
When acting under an Enduring Power of Attorney, Lasting Power of Attorney or a Deputyship Order only very limited gifts can be made
If in doubt, obtain prior approval of the Court of Protection before making gifts
Previously, applications of this type had limited benefits where it was unlikely that “P” would have survived the gift by 7 years. However, we now have the new residence nil rate band to bear in mind also

19. What is the Court likely to take into account?
Was P in the habit of making gifts before the onset of incapacity?
The impact on P’s financial security
Life expectancy
The cost of residential nursing care
Receipt of after care pursuant to Section 117 and the Mental Health Act or NHS continuing healthcare?
Will the proposed gifts interfere with the position under the Will or intestacy or in reality is this an acceleration of the distribution of assets?
How will the proposed gifts impact on the Inheritance Tax position?
The Court can authorise “one off” gifts of capital, but also authorise the Deputy/Attorney to make further gifts in line with the annual IHT exemption of £3,000 and gifts out of excess income
In light of the residence nil rate band, an application for gifting to the Court of Protection has an increased financial benefit.

20. Statutory Wills
It is also possible to apply to the Court of Protection for permission to sign a Will on behalf of someone who lacks capacity to put a Will in place themselves
This is called a Statutory Will application
It is worth bearing in mind where the current Will or the position under intestacy is wholly inappropriate given P’s family circumstances

21. Further Resources