A guide to Lasting Power of Attorney, Deputyships, Appointeeships, and Wills and Trusts
There are many factors to consider when it comes to preparing for the future. Many families rely exclusively on a will, and do not understand the importance of a trust. The difference between an appointee, lasting power of attorney, and a deputy can also be confusing. That’s why JMW Solicitors has kindly put together this useful guide for those individuals who may want to explore other options available to them.
Please note that the information provided on this page was correct at time of publication in July 2021.
Lasting Power of Attorney
A lasting power of attorney is a legal document in which a nominated person or people are authorised to make decisions on behalf of someone else.
Anyone over the age of 18 can be an attorney and it is usually close family members who are appointed. However, friends or solicitors can also be appointed, either jointly with family members, on their own, or as replacements.
An attorney only has authority to act when the lasting power of attorney is registered at the Office of the Public Guardian. An attorney under a health and welfare power can only make decisions when the individual is unable to do so because they are no longer capable.
There is no limit on the number of attorneys an individual can have. The number of attorneys depends on individual circumstances. For some people, having one attorney may be sufficient, but for others, it may be the case that three or four attorneys may be more suitable. It is rare for people to need more than four attorneys and the most usual number is two.
The only way a person can be legally appointed to manage your affairs would be through a deputyship order at the Court of Protection (deputyships below).
If a loved one does not have the mental capacity to manage their affairs, an application to the Court of Protection must be made to appoint a deputy who is then authorised to make decisions on their behalf. Without this, nothing can be done with their property and financial affairs. This means nobody can deal with their house, bank accounts, bills, debts, care fees or make sure they have enough money for food and everyday needs.
Anybody over the age of 18 can apply to be a deputy; however, it is the court’s decision who is appointed. Typically, a family member or close friend will be appointed as a lay deputy or a solicitor as a professional deputy. We can also act as a joint deputy alongside a relative or friend.
Appointed deputies will be issued a court order from the Court of Protection stating what they can and cannot do. They are expected to follow the rules of the Mental Capacity Act Code of Practice and a range of standards. Some responsibilities include:
* Sell or purchase property and make sure it is suitably adapted for your loved one
* Enter into, manage or terminate tenancy agreements
* Keep records of accounts, receipts, bank statements, investment information, tax returns and all dealings with HM Revenue and Customs
* Arrange payments of routine bills and household accounts
* Budget for financial management and manage cash flow figures
* Apply and regularly review all state benefits if required
* Ensure essential maintenance and repairs are carried out and insurance is kept up-to-date on any property owned by your loved one.
“The application process to become a lay deputy can be daunting, complicated and overwhelming, especially for someone who is already vulnerable or has other commitments. That’s why our professional deputy service is relied on by many, as we provide a high level of knowledge, ability and experience to manage all aspects of your loved one’s needs. Some reasons many clients prefer to put their trust in us as a professional deputy are:
* We have good relationships with therapists and care workers to effectively manage all types of care packages to guarantee all care needs are met.
* We work holistically with the individual, their families and friends to deliver the best outcome.
* We can draw on the expertise and knowledge of financial advisors we know to ensure funds are budgeted and invested to meet all needs required.”
If a person is incapable of managing their own finances due to a physical or mental health incapacity and cannot cope with claiming benefits, paying bills or managing money, they may need an appointee to provide help. An appointee may be required on a temporary or permanent basis.
Appointeeship is a term used by the DWP when they authorise an organisation or an individual to take on the legal responsibilities of receiving and managing a person’s welfare benefit entitlements.
An appointee has to be aged 18 plus, and can be a family member or trusted friend or a specialist organisation. The local council can also act as the appointee – however, as there can be conflicts of interest when local authorities become appointees this should be a last resort. Many care providers also still act as appointee – however, again, due to the conflicts of interest these arrangements are increasingly being discouraged.
A deputy is put in place by the Court of Protection and undertakes the responsibility for the management of all of a person’s financial affairs if they become incapable of doing so themselves. This may include managing savings, pensions and all other sources of income or assets including property and valuables.
The exact level of responsibility and authority granted by the Court of Protection varies as it depends on the individual court order granted.
An appointee has the responsibility to act in the best interest of the individual by managing a person’s welfare benefits in order to ensure that everyday bills are paid and to report any changes in circumstances to the DWP. Hence, an appointee has a much smaller level of legal authority over someone’s finances as it is simply restricted to their welfare benefit payments.
A deputy is supervised and regulated by the Office of the Public Guardian (OPG) whilst appointees are regulated by the Department of Work and Pensions (DWP).
A will is a legal document in which you can set out your final wishes in relation to the administration and distribution of your estate. In order to make a will, you must be over the age of 18 and be of sound mind. Making a will is a positive act which will greatly assist loved ones when you pass away. In making a will you can have peace of mind with the knowledge that your wishes shall be carried out. With a little planning, you can ensure that your wealth and the gifts you wish to make reach the right people at the right time with tax being minimised where possible.
Your assets will pass in accordance with the Intestacy Rules. This means that the law will dictate who can deal with, and benefit from, your estate. This does not necessarily mean that your assets shall pass to those whom you consider closest to you which could be troublesome for families.
If someone has learning disabilities and wants to create or amend a will, the first step is to speak to a solicitor so they can explain the options available. It’s important to note that even though someone with learning disabilities may not be able to manage their financial affairs, they may still have capacity to make or amend a will.
If it has been determined that the person does not have mental capacity, then a will known as a ‘Statutory Will’ must be drawn up and approved by the Court of Protection. The court will look at the request for the will and determine whether it’s in the individual’s best interests. An application can be made if the person is not able to understand:
* The implication of making or changing their will
* How much money they have or what property they own
* How making or changing their will might affect the people they know (either those mentioned in the will or those left out).
The people who can apply for a statutory will include:
* A deputy
* A solicitor
* Office of the Public Guardian (OPG)
* The person who has applied to be appointed as a deputy
* Any beneficiary under the last will or intestacy
* Any person who is an attorney under an Enduring power of attorney or lasting power of attorney
* Any other person who has the permission of the court.
* If the person has come into a significant amount of money, for example a personal injury award
* Inheritance tax planning purposes
* A person’s circumstances have changed, for example an individual would have wanted to include someone who’s been caring for them for years.
A Trust is a legal arrangement whereby the person creating the trust (the Settlor) gives control of the property (the trust fund) to a person or institution (the trustees) for the benefit of others (the beneficiaries). In a discretionary trust, the trustees have ‘discretion’ about how to use the trust fund and can distribute capital and income as they please in accordance with the trust document. No one beneficiary has any right to the trust fund but is merely a potential beneficiary and therefore the trust fund is one step removed from personal ownership.
If you have a child or are responsible for a dependent who has a disability, JMW can help you put in place measures to help them manage in the event that something happens to you.
A discretionary trust can be created as a standalone trust during your lifetime or within a will. If the Settlor is not a trustee, then it is advisable to have a “Letter of Wishes” alongside the trust, outlining any wishes the Settlor may have about the operation of the trust. However, aside letter of wishes is not legally binding and therefore the choice of trustees is extremely important.
There are many advantages to having a discretionary trust which include:
* Controlling assets for young or vulnerable beneficiaries
* Protecting assets against financial difficulty of a beneficiary in the future, for example the possibility of divorce or bankruptcy
* If the beneficiary is on means-tested state benefits, they can continue to claim those benefits – notwithstanding the value of the estate in a trust
* Flexibility to regularly alter the Letter of Wishes, without having to formally change a will
* Inheritance Tax savings for future generations.
A Disabled Person’s Trust allows you to put away assets to be used for the recipient’s benefit during their lifetime without affecting their right to receive means-tested state benefits. This can include covering expenses, such as:
* Daily living costs
* Care fees
* Accommodation fees.
A Disabled Person’s Trust is also taxed differently from other trusts, meaning there can be advantages with regards to Income Tax, Capital Gains Tax and Inheritance Tax.
To qualify for a Disabled Person’s Trust, a disabled person is classified as:
* A person unable to administer their property or manage their affairs because of mental disorder as determined by the Mental Health Act 1983
* A person in receipt of attendance allowance or disability living allowance (DLA) by virtue of entitlement to the care component at the highest or middle rate
* A person is in receipt of personal independence payment
* A person in receipt of an increased disablement pension
* A person in receipt of constant attendance allowance
* A person in receipt of armed forces independence payment.
A discretionary trust is managed by appointed trustees who decide who can become a beneficiary. The trustees also determine when and how the beneficiary will receive any inheritance from the trust. This type of trust is useful if you are currently unsure as to how you wish your estate to be distributed, or if there are factors that could affect the trust that you cannot be sure of when making your will. The trustees who you appoint will be able to make these decisions on your behalf.
While this type of trust can be useful when considering the needs of a disabled person, and may be beneficial from an Inheritance Tax perspective, there are also drawbacks. For example, a discretionary trust can attract higher rates of Income Tax and Capital Gains Tax.
A disabled person’s trust is a type of trust which qualifies for special Income Tax, Capital Gains Tax and Inheritance Tax treatment. Somewhat confusingly, a disabled person’s trust can also be a discretionary trust (but is not necessarily so). The main differences relate to tax, and the extent to which a beneficiary is automatically entitled to income or capital (which will have an effect on means tested benefits). Due to the complexity of this area of law, we always recommend that specialist advice is sought.
There are many options available for families when it comes to wills, trusts and deputyships. JMW offers free, no-obligation advice for families to ensure they consider all options available. They have experience in drafting wills and trusts and help their clients negotiate this complex area of law.
If you would like to find out more information, you can call their Court of Protection or Private Client departments today on 0345 872 6666 or contact them via email at Megan.Christie-Copeland@jmw.co.uk.
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