Adjusting to the challenges caused by coronavirus has been difficult for all of us. However, for those acting as the executor of the Will during this period, the obligations placed...
The Role of an Attorney
A Lasting Power of Attorney is a legal document that allows someone (the Donor) to choose someone they trust (the Attorney) to make decisions on their behalf about their property and financial affairs, or their health and welfare, or both.
If you are already appointed as an Attorney, whether under a Lasting Power of Attorney (LPA) for property and financial affairs registered at the Office of the Public Guardian (OPG), or a registered or unregistered Enduring Power of Attorney (EPA), the following information will apply to you.
The Office of the Public Guardian (OPG)
When acting as an Attorney, if someone doesn’t agree with your decisions or believes that you are not acting in the Donor’s best interests, they can inform the OPG which may then investigate and potentially take action against you.
When can I begin acting as an Attorney?
You should only act where:
- The Donor is still mentally capable of making decisions but has asked you to act on their behalf. Where the Donor still has the mental capacity to be involved in decision-making, then you must consult with them on any decision you are making on their behalf.
- The Donor is mentally incapable of making decisions, even with support. You must assume that the Donor has the mental capacity to make a decision until it is established that the Donor lacks that mental capacity. The Donor is not to be treated as mentally incapable of making a decision merely because they make an unwise decision. Where you have assessed that the Donor lacks the mental capacity to be involved in making certain decisions, you must ensure that the decisions you make on their behalf are in their best interests.
If you become bankrupt, you will no longer be allowed to act as an Attorney.
How do I decide whether the Donor has mental capacity?
The Donor is deemed to be mentally incapable if they cannot communicate their decisions by any means. Otherwise, the two-stage test for mental capacity is:
- Does the Donor have an impairment of, or a disturbance in the functioning of, the mind or brain (for example, dementia, brain damage or a medical condition that causes confusion)? If no, the Donor is mentally capable. If yes, consider the second stage.
- Does the impairment or disturbance mean that the Donor is unable to make the specific decision at the time that it needs to be made? If no, the Donor is mentally capable. If yes, the Donor is mentally incapable.
The Donor is considered unable to make a decision if they cannot understand information about the decision to be made, retain that information, and weigh it as part of the decision making process, before being able to communicate their decision.
How do I begin acting as an Attorney?
You must notify financial institutions (banks, pension providers etc.) that the Donor has signed a Power of Attorney and produce evidence of your identity. You may also need to complete some forms to register that you are the Attorney.
The financial institutions will want to see the original Power of Attorney, or a certified copy, which we can supply on request. A certified copy is a photocopy which bears a certificate signed by a solicitor on each page.
What decisions can I make as an Attorney?
Subject to any restrictions, conditions or guidance (otherwise known as instructions and preferences) as may appear in the Power of Attorney, you will be able to make almost all the decisions about property and financial affairs that the Donor would have made. This would include, for example:
- using bank and building society accounts
- claiming, receiving and using benefits and pensions
- paying household, care and other bills; making and selling investments
- buying or selling property.
However, when selling a property, you will need to apply to the Court of Protection before proceeding with the sale in any of the following circumstances:
- the sale is below the market value
- you want to buy the property
- the Donor’s Will leaves that property to a specific beneficiary. Applying to the Court in this situation will ensure that the proceeds from the sale of the property still pass to the specific beneficiary in the event of the Donor’s death, whereas ordinarily the gift would fail.
How do I act with another Attorney?
Jointly (also called ‘Together’): this means that all the Attorneys must always act together. If just one Attorney does not agree with the proposed decision, it cannot be made. This applies to minor decisions such as signing a cheque or major decisions such as selling a property. If one of the Attorneys dies or loses the mental capacity to act then the Power of Attorney cannot be used as the Attorneys will no longer be able to act jointly.
Jointly and severally (also called ‘Together and independently’): this means that one Attorney can act on their own, or some or all of the Attorneys can choose to act together. If one of the Attorneys becomes ill, dies or loses the mental capacity to act, the remaining Attorney(s) can continue to act. Note that if one Attorney makes a decision on behalf of the Donor, then all of the Attorneys remain responsible for any such decision whether or not they were a party to it.
Jointly (Together) for some decisions and Jointly and severally (Together and independently) for other decisions: this is a combination of the two options set out above.
Can I claim out-of-pocket expense or charge for my services?
You can claim out-of-pocket expenses, such as telephone calls, postage charges and transport costs that are incurred whilst specifically undertaking your duties as Attorney.
Only a professional can charge for acting in this role unless there is a specific provision made in the Power of Attorney.
What are my duties as Attorney?
When acting as Attorney you must:
- Act or make decisions in the Donor’s best interests
- Comply with the Mental Capacity Act 2005 and its Code of Practice (which can be emailed to you on request)
- Act only within the scope of your authority as Attorney
- Not delegate the powers given to you under the Power of Attorney unless you have been authorised to do so
- Not benefit yourself but to benefit the Donor, which means avoiding conflicts of interest and, in particular, not to profit or acquire personal benefit from your position
- Act with honesty and integrity
- Keep the Donor’s affairs confidential unless the Donor has consented otherwise
- Comply with the directions of the Court of Protection
- Not give up the role without telling the Donor and the Court
- Keep the Donor’s money and property separate from your own
- Keep accurate accounts of your dealings as an Attorney
What happens when the Donor dies?
The Power of Attorney will automatically come to an end. You should send the original Power of Attorney and death certificate to the OPG as soon as possible. You cannot, for example, close the Donor’s bank accounts after their death and distribute the money to their beneficiaries. This is the job of the Executor in the Will, or the Administrator where there is no Will.
Can I make gifts on the Donor’s behalf?
An Attorney has very limited power to make gifts from the assets of the Donor. Any gifts incorrectly made by the Attorney may need to be repaid personally by the Attorney, so great care is needed.
You can only make gifts to people who are related to or connected with the Donor on occasions such as birthdays, weddings or anniversaries, or any other occasion such as religious festivals, when they would have usually given gifts. If the Donor previously gave to charity on a regular basis, then you can continue to do so on their behalf.
The value of any gift must be reasonable and in proportion to the Donor’s estate.
You must make an application to the Court of Protection for permission to make larger gifts or those that are not considered customary, for example, for Inheritance Tax planning.
Do I have the right to know the content of the Donor’s Will?
Wills form part of a Donor’s financial affairs. Unless the Donor has provided contrary instructions or there are concerns about the actions of the Attorney, an Attorney is entitled to be provided with a copy of the relevant documents and the Donor must be notified in advance. The original Will documents should not be passed to an Attorney, unless ordered otherwise, by the Court of Protection.
If you sell or otherwise dispose of an asset specifically referred to in the Donor’s Will, then the gift of that asset, in the event of the Donor’s death, will fail and the intended beneficiary will not receive it. To avoid this situation, you should seek a specific Court Order prior to disposing of the asset in question.
Can the Donor’s Will be changed?
Just because someone cannot deal with their financial affairs does not mean that they cannot make a Will. The Mental Capacity Act 2005 imposes a duty to assume that capacity is present unless it can be shown to be absent and this also applies to ‘testamentary capacity’ (the mental ability to make a Will). However, if it can be shown that the Donor does not have testamentary capacity, and therefore cannot make a Will, then it’s possible to apply to the Court of Protection for a Statutory Will to be made on the Donor’s behalf.
An application for a Statutory Will should set out the personal, financial and family circumstances of the Donor. It should include details of anyone who might expect to inherit something in the event of the Donor’s death, and specifically those who may be disadvantaged by the terms of any Statutory Will. After representations by all parties, including the Official Solicitor on behalf of the Donor, the Court of Protection decides on the terms of any Statutory Will.
Protecting the Donor’s assets
Legal fees for such advice can be paid from the Donor’s assets. Some general points to consider are:
Arrange domiciliary care: Domiciliary care is provided at the Donor’ home and is designed to promote the independence of those with care needs. This can range from a 15-minute check to ensure that medication has been taken, to 24-hour live-in care.
An effective care package can help someone to remain in their own home for as long as possible, making it less likely that the Donor will need permanent care in a home. This option should therefore be viewed as a sensible financial planning measure. We can provide details on request of an independent social worker who can assess the need for, and then arrange, domiciliary care.
Apply for NHS Continuing Care funding: If a person has primarily nursing needs, then it is possible for all care and accommodation costs to be paid by the NHS. NHS Continuing Care funding is a complex area and we can advise on arranging for the appropriate assessment required and challenging assessments which incorrectly refuse the funding.
Claim Attendance Allowance: Attendance Allowance is a tax-free benefit for people aged 65 and over who need help with personal care because they are physically or mentally disabled. If the Donor is under the age of 65, the Personal Independence Payment may be available instead.
You should ensure that Attendance Allowance is claimed where applicable and, where it is already in payment, that it is being paid at the correct rate.
Claim a reduction in Council Tax: There is a 25% discount on Council Tax for properties occupied by one person only. If an adult occupant is severely mentally impaired (diagnosed with Alzheimer’s disease or similar) then that person is ignored for the purposes of calculating Council Tax under the Class U exemption. This could either result in a 25% reduction in Council Tax where two people live in the property, or a 100% reduction where there is just one person living in the property.
If a property is left empty because the sole occupier moved into a hospital or care home, then no Council Tax is payable under the Classes E and I exemptions.
Take out a Funeral Plan: Cash in the bank will be taken into account in any financial assessment for care home fees. If some of those funds were used to purchase a Funeral Plan, then they cannot be considered by the Local Authority. To purchase a Funeral Plan for the Donor, you can contact:
Golden Leaves – www.goldenleaves.com. Telephone: 0800 85 44 48
Take out a Pre-Paid Probate Plan: If a Donor’s funds were used to purchase a pre-paid Probate Plan to the cost of administering their estate by a solicitor, then they cannot be taken into account by the Local Authority. Further information about a pre-paid Probate Plan can be provided on request.
Obtain independent financial advice: As an Attorney, it is your duty to safeguard the finances of the Donor. The best way to avoid any criticism is to seek the advice of an Independent Financial Adviser (IFA) who specialises in this area. An appropriately qualified IFA can be recommended to you on request.
For those already in a care home or about to move into one, an available option is an Immediate Care Fees plan (also known as an Immediate Needs Annuity or Immediate Lifetime Care plan). Essentially, this is an insurance policy to cover any care home fees as required. The plan is intended to provide certainty as to how much capital will be used to meet care home fees and how much capital will be left as an inheritance.
An Immediate Care Fees plan is designed for individuals requiring assistance with everyday tasks (known as Activities of Daily Living) or supervision in the case of mental impairment. Needing care in a home is not a necessity and so the plan can be suitable for those wanting to receive care in their own home.
The plan is a contract between the Donor and an insurance company that guarantees to pay a series of regular payments in return for a non-refundable one-off lump sum. The regular payments can start as soon as the premium has been paid. Typically, the plan pays monthly payments directly to the chosen care provider for the rest of the Donor’s life.
The regular payments are tax-free if paid directly to the ‘registered care provider’ (whether the care home or formal care home agency). If payments are made directly to the Donor, then the appropriate income tax rate will be deducted. This is the current position which HM Revenue & Customs which may change during the life of the plan.
The amount of the lump sum needed to purchase the plan will depend on:
- The Donor’s age
- The Donor’s state of health
- The income required and whether this needs to increase over time
- Any capital guarantees
- The frequency of payments
The potential drawbacks of an Immediate Care Fees plan are:
- The cost of the plan can be expensive
- The premium paid may be insufficient to cover all costs of care at the commencement of the plan. Additional funds may therefore be required from elsewhere. Even if an increasing income from the plan is selected prior to commencement of it, the rate of increase chosen is not guaranteed to match future increase in care costs and so any shortfall must be met by the Donor
- There is no cash-in value. Therefore, the Donor could pay for the plan and die soon after, leaving nothing to their estate. At an additional cost, it may be possible to put in place capital guarantees (also known as premium protection) by purchasing life assurance at the same time as the plan. This is an insurance policy so that, if the Donor dies during the specified term, a tax-free lump sum is paid out based on proportion of the single initial premium. The term assurance has no cash-in value
- Some State and Local Authority benefits are means-tested and the Donor’s entitlement to receive them may be affected by the payments from the plan. Non-means-tested benefits are not currently affected.