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Thinking ahead
Local legal expert HELEN STARKIE offers up some useful advice…
S
ome of the most common questions we get asked in our practice (and our answers) are along the following lines:
My friend has transferred the ownership of her house to her children to avoid nursing home fees when she gets old and Inheritance Tax when she dies. Should I do the same? Almost certainly not! Your friend has not solved either issue by transferring her ownership. Should she need care, she will be assessed as if she still owned the house as she has deliberately deprived herself of an assessable asset – and if she continues to live in the house her gift will be treated for Inheritance Tax purposes as not having been made. She has also created the possibility of a whole variety of other problems – among them the exposure of her children to a significant liability to Capital Gains Tax – but there are other sensible ways of planning to minimise the impact of future care costs about which your solicitor can advise you. My friend tells me that I do not need to make a Lasting Power of Attorney now because my husband will be able to deal with my affairs if I become ill. All our assets are in joint names. Your friend is wrong again. Your husband will not automatically be able to deal with your affairs even if your assets are in joint names. Indeed he may find his he is unable to access even his own funds in your joint account. Some banks freeze all accounts, including joint ones, when a customer loses their capacity to deal with their finances. And whereas all investments may be held jointly there will almost certainly be some things in your sole name – your pension for example. Surely as I am mentally fully capable there is no need for me to make a Lasting Power of Attorney yet? After all I may never become ill – and I can make a Lasting Power of Attorney if and when I do. You need to have mental capacity to make a Lasting Power of Attorney. Loss of capacity is not always gradual, allowing us to plan. It can happen suddenly (a stroke or a road accident, for example) in which case you will have left things too late. Furthermore a Lasting Power cannot be used until it has been registered at the Office of the Public Guardian and that process takes time – often as long as three months. Your affairs will need dealing with as soon as you become ill.
“YOUR AFFAIRS WILL NEED DEALING WITH AS SOON AS YOU BECOME ILL” My mother suffers from dementia. She has never made a Lasting Power of Attorney or a Will. I cannot access her money to pay her bills and I think there may be a big tax bill to pay when she dies. I am worried sick. What can I do? It is a pity that your mother did not save you the angst you are suffering by taking the simple steps of making a Lasting Power of Attorney and a Will whilst she was fit and healthy! However it is not too late to sort things out. Although your mother suffers from dementia and may not have sufficient mental capacity to manage her own affairs, she may still have enough understanding to make a Lasting Power of Attorney. Legal tests for capacity differ according to the exercise being undertaken. Your mother may even have capacity to make a Will (the capacity test here is more complex than that for making a Power of
Attorney, but more specific than what is required to manage one’s own affairs independently). A solicitor specialising in the field will be able to assess your mother’s capacity for both exercises and prepare the relevant documents for her to sign if capable. And if your mother does lack capacity all is still not lost (although the cost of sorting things will be significantly higher than if she had planned ahead). An application can be made to the Court of Protection for a deputy (possibly you) to be appointed to deal with her affairs – and it is possible to apply to the same court for a Statutory Will to be made on your mother’s behalf to address the tax issues you mention. ■
Helen Starkie Solicitor 38 Gay Street, Bath, BA1 2NT; 01225 442353; www.helenstarkie.co.uk www.mediaclash.co.uk I BATH LIFE I 91