Without a Lasting Power of Attorney, (LPA) no-one including your spouse, has the legal authority to make any decisions for you if you become unable to manage your own affairs.
There are two types of LPAs, one for property and financial affairs and the other for health and welfare. By signing both types, it ensures the chosen attorneys can assist in all aspects of their life.
To make an LPA, the person making the LPA (the donor) must be able to show they understand what an LPA is, who they are appointing and why, the types of activities the attorneys can undertake for them, the consequences of not having an LPA and how this can be revoked. A diagnosis of a mental health illness or memory loss does not automatically mean an LPA cannot be made. However, it is recommended that everyone makes an LPA when they are well and before a diagnosis is given to ensure the opportunity to make an LPA is not missed.
It is possible for the donor to make their own LPA through the Office of the Public Guardian (OPG). However, it is recommended that you take legal advice on the LPAs. This is to ensure they cover all eventualities and include key guidance clauses to your attorneys to support them in their role.
You can appoint more than one person to be your attorney and it is recommended you do, to ensure there is someone to manage your affairs if your first attorney becomes unable to. Where one attorney is appointed, which can cause difficulties with joint assets or if the attorney dies. Therefore, taking advice on the role of attorney, how many should be appointed and when they can act is extremely important.
The LPAs must be registered with the Office of the Public Guardian (OPG) before they can be used. The OPG will reject the registration if there are any errors, resulting in the LPAs needing to be prepared and signed again. If there is one ”i” not dotted, too many restrictions placed on the attorneys’ authority or if the signatories have not signed the LPAs in the correct order, this can result in rejection and consequently, delay.
If the donor does not have capacity to make the LPAs then someone will need to apply to the Court of Protection for a deputyship order. Deputyship is a more timely and costly procedure than making LPAs.
Under the Mental Capacity Act 2005, everyone over the age of 16 is presumed to have capacity unless it is proven otherwise. Capacity is time and decision specific. For example, you cannot assume that someone lacks capacity to manage a current account simply because they could not make a decision about a larger financial transaction, for example selling a property. You also cannot assume that they lack capacity this week because they didn’t have capacity last week. Loss of capacity can be temporary and can be caused by illnesses such as infections or short-term trauma so can on some occasions be quickly recovered.
You must ensure you support the person you are caring for to make their own decisions where they are able to do so. This could be altering the way the decision is communicated to them, for example using picture symbols instead of words or breaking the decision down into a series of questions. You cannot assume they don’t have capacity simply because they cannot communicate this to you. Communication can be by any means so can be through pictures, symbols or actions.
You must always act in the person’s best interests, ensuring your own interests do not conflict with their interests. You cannot put your own needs and wishes above those of the person you care for.
A will sets out who should administer your estate and who should benefit from your estate. Without a will your estate will pass under the intestacy rules. Who inherits under the intestacy rules depends on your family circumstances. If you are married, it is not certain that all your estate will pass to your spouse as it is dependent on the value of your estate. It is possible that your children will inherit some of your estate, even if your spouse survives you. If you are not married then it will pass to direct descendants but if you have none it will pass to siblings and then their children and failing that to wider family members. If you have a partner and are not married, they will inherit nothing under the intestacy rules as the rules only provide for married couples, biological and legally adopted relatives. Step-children are not included in the rules either.
Therefore it is recommended you make a will to precisely set out who should inherit and on what terms. The will can ensure unmarried partners are provided for. It can ensure it sets out how the estate is to be divided between children or other family members as it does not necessarily have to be an equal split between your chosen beneficiaries.
The will can also set out who inherits if a chosen beneficiary dies before you, ensuring your estate passes to people of your choice. It can also set out what age minor children or grandchildren should inherit as many feel that 18 is to young for someone to inherit a large sum of money.
In your will, you can also include a trust to protect assets in the event any of your beneficiaries are vulnerable. A trust can help protect funds where the beneficially is not financially sensible and may fritter the funds away. A trust can also be used to support a beneficiary during their lifetime whilst making sure the capital is ring-fenced and passes in accordance with your own will and not the beneficiary’s will. In certain circumstances a trust can also be used to protect assets against divorce proceedings and trustee-in-bankruptcy.
The person entitled to the estate under the intestacy rules is also the person entitled to administer the estate. This may not be the most suitable person. Many clients appoint an independent executor, someone who is not benefitting under the estate, to oversee the estate.
It is the executor of a will who is entitled to arrange the funeral. Therefore if you have particular funeral wishes or there may be a dispute regarding your funeral it is recommended you make a will, noting your funeral wishes.
You can also set out who is to receive certain personal items. Therefore if you have expensive and/or sentimental items that you want to go to certain individuals this should be set out in your will to prevent a dispute on those items.
It can be confusing to know what to do when a loved one dies. Here, we set out the steps required.
Register the death
A relative, a person present at the death, or the executor of the will can register the death.
You’ll need the medical certificate issued by the doctor certifying the death to register; the local registrar will confirm to you which other information you will need to complete the registration.
Find the will
All efforts should be made to locate a will. If it’s valid, this will state how the estate will be distributed and who is appointed as executor.
If there’s no valid will, the estate will pass under the rules of intestacy. These rules dictate who benefits from the estate dependent on which relatives are living at the time of death. There’s also an order of priority as to who can deal with the administration.
Arrange the funeral
The executor or administrator under intestacy will have the authority to arrange the funeral. Funeral wishes may be expressed in the will if there is one, or sometimes there will be a prepaid funeral plan in place.
Once a bank is notified of the death, the monies in the account will be frozen. You can however take the funeral account to the bank and this can be settled from the deceased account directly to the funeral director.
Is there a property?
If the deceased owned a property which has now become vacant, it is important that the building insurance is notified. The property being unoccupied will often change the terms of the insurance, such as the need for a property inspection every seven days. If the insurance provider is not notified of the property becoming vacant, or the terms are not complied with, this can affect the validity of the policy.
If the property is uninsured, it will be necessary for cover to be put adequate cover in place. An insurance broker will be able to assist you in finding a policy if you are unable to find cover yourself.
What happens with the estate?
The executor will need to administer the estate according to the will. If there is no will, the administrator will need to administer the estate in accordance with the intestacy rules. Administration includes notifying the financial institutions, applying for probate if required, collecting in the assets and paying the debts of the estate. Executors and administrators can appoint legal professionals to help them should they wish to do so.
Before the estate is distributed all liabilities, administrative and testamentary expenses must be paid. If any sum is left outstanding after the estate has been distributed, the executor or administrator may be personally liable for this.
Do I need to get a grant of representation?
A grant is a formal issue by the court to confirm someone has the appropriate legal authority to administer the estate. The person to take out the grant would be the executor or administrator.
If the estate is a small one, it’s possible that banks or account providers will close down the accounts without having sight of a grant. The assets would still need to be distributed in accordance with the will or intestacy rules.
If there’s property to be dealt with, it’s likely a grant will need to be obtained. Equally, if there are large sums of money held in accounts, those account providers will need sight of the grant before releasing funds.
When applying for the grant, an inheritance tax account will need to be produced to HMRC. Any tax payable should be paid within six months to avoid interest accruing on the outstanding tax and the account should be submitted within twelve months to avoid any penalties.
There’s more debt than money, what do I do?
If the deceased individual’s estate contains more debts than it does assets, it’s important that you don’t make payment of any outstanding sum, or hold yourself out as an executor or administrator in any way if you haven’t been appointed under the will.
If you do, you could open yourself up to liability for some or all of the deceased individual’s debts. If this is the case, it’s possible the estate is insolvent and it is recommended you seek advice from an insolvency practitioner before taking any steps to administer the estate.
This guidance has been kindly provided by Irwin Mitchell, Thomas Eggar House, Friary Ln, Chichester PO19 1UF
https://www.irwinmitchell.com/our-offices/united-kingdom/chichester