Attorneys and Deputies: Balancing the Books for Elderly Relatives
- AuthorPaul Hajek
The conundrum being faced by the ranks of attorneys, deputies and families managing this money, is how to balance the books and secure the long term care provision required and invest wisely for a future which protects the capital for those concerned.
According to recent Parliamentary statistics there is over 3 million GBP held on deposit at the Court Funds Office on behalf of elderly clients and those who have received damages awards.
The current rate of interest paid on money held on special deposit at the Court of Protection is 0.5 per cent. For a higher rate tax payer this equates to 0.3 % per annum and 0.4 % for a basic rate tax payer.
The rate looks even less attractive when you considers the impact of inflation on the capital being held.
It may not necessarily be a sensible strategy to leave funds on deposit at the Court just because the person concerned is elderly and in relatively poor health.
Questions can be raised by family members as to why funds were not invested for a better return and why inheritance tax mitigation was not considered by the deputy or attorney?
The Court of Protection will approve applications to make gifts to mitigate the impact of inheritance tax.
Some thought ought to be given to whether this avenue should be explored.
An early and frequently reviewed course of action must be to establish a sensible investment strategy, at the same time as considering whether it is appropriate to take steps to mitigate inheritance tax.
The key point must be for the deputy/ attorney to demonstrate that they have sought proper professional advice in each situation.
In the current economic situation the situation is very challenging given that both capital and income are facing erosion this imposes an even greater burden on the deputy/attorney involved.
Further, given the need to keep the funds in a relatively liquid state so that they can be retrieved if needed at short notice, all in all presents a virtually impossible situation.
Not every situation will be capable of improvement but at the very least consideration should be given to finding a better rate of return than is currently available at the Court and being seen to be doing more for the financial health and inheritance tax planning of the party concerned.
If you would like to discuss further the implications for you and your role as a Lasting Power Attorney or Deputy please contact Hilary on 01454 312125 or by email hilary[at]cluttoncox.co.uk