Can I leave my estate directly to my grandchild?

I plan to update my will and would like to leave a share of my estate directly to my only grandchild, who is under 18, with the remaining bulk divided equally between my two daughters. What considerations are there?

Emily Minett, senior associate at law firm Wedlake Bell, says it is good that you are keeping your will under review. 

The starting point is to consider how you would like your daughters and grandchild to benefit from your estate. Would you like them to inherit their shares outright or on trust? I note that your grandchild is currently under the age of 18. Have you considered whether you would like them to inherit their share of your estate at the age of 18, or at a time when they are more financially mature?

As it is impossible to predict the personal and financial circumstances of your beneficiaries on your death, leaving assets on trust for your beneficiaries rather than outright can have advantages. For example, assets can be retained in the trust to protect against claims from third parties such as divorcing spouses. Further, you can give your trustees the discretion to decide when your grandchild might be sensible enough to receive capital distributions, as opposed to automatically at 18. 

In any event, if you were to die while your grandchild is under 18, you should consider who would be best placed to manage the funds for their benefit until they inherit outright. It would be necessary to appoint at least two people under your will for this purpose. 

Another consideration is inheritance tax (IHT). Across the UK this is charged at 40 per cent on the value of assets that exceed your IHT nil-rate band (£325,000), subject to available exemptions and reliefs. If IHT is payable on your estate, this will reduce the amount available for your children and grandchild.

You should consider how any IHT would be paid from your estate and whether, for example, you would like the share for your grandchild to pass free of IHT, with your daughters’ share to bear the tax.

You could also consider ways of mitigating your IHT liability; for example, by making gifts to beneficiaries during your lifetime. If you survive seven years from the date any gifts are made, these will pass free from IHT. You might also be able to take advantage of the IHT residence nil-rate band (currently £175,000), which is available if your estate includes a residential property interest that you leave outright to direct descendants.

It is always prudent to seek professional advice so that your will is drafted efficiently from a succession planning perspective and takes advantage of all available IHT reliefs.

Can I prove my sister’s financial abuse?

My father has struggled with mental capacity since being diagnosed with dementia five years ago. My sister, who lives a mile from him, organised a lasting power of attorney for herself which has been active for around three years now. Around a year ago, my sister and I agreed our father would be better off in a care home, yet she seems to have made no effort to put any plans in place despite my offers to help. 

I’ve noticed my sister has been going on expensive holidays and my father mentioned a large lump sum which she requested from him though he did not remember any context or details when I probed. I believe that my sister could be abusing the LPA and using my father’s money for her own personal gain, but I have no hard evidence. What should I do?

Samara Dutton, partner at law firm Collyer Bristow, says financial abuse of this nature is suspected to be widespread and often carried out by family members. On these facts, a sensible first step would be to speak to your sister. The evidence is limited, and it is possible there has been a genuine misunderstanding. If so, it would be unfortunate to sour relationships by making formal accusations without first affording her an opportunity to explain. However, this is not always appropriate: in some circumstances, it is better not to alert a potential abuser to your suspicions while carrying out further investigation. 

If your father has made gifts to your sister while lacking capacity, those gifts would be void and your sister should repay them. If she has been using the LPA to make gifts to herself, such gifts (over £3,000) are expressly forbidden by the Mental Capacity Act, and should, again, be repaid. That may also be sufficiently concerning conduct by your sister to merit the LPA being revoked.

As such, if your sister cannot adequately explain her recent spending, you may wish to seek the revocation of the LPA so she no longer has control over your father’s assets.

You can apply to the Court of Protection for this, but the court would require more than mere suspicion. You will either need to collate more evidence — try speaking to his friends, neighbours or others involved with his care — or you could refer the matter to the Office of the Public Guardian (OPG). Remember the rules around LPA differ slightly in different parts of the UK.

The OPG is responsible for supervising acting attorneys and ensuring they carry out their duties properly. It no longer requires significant evidence of wrongdoing upfront and what you have described should be sufficient to prompt a formal investigation of your sister. This will include obtaining copies of your father’s bank statements and asking your sister about any unusual transactions. If, following investigation, the OPG shares your concerns, it will make its own application to the court to revoke the LPA.

OPG investigations can take months. To protect your father’s money in the interim, consider speaking to his bank or other asset holders. Although you do not have authority over his property, these institutions may agree to flag or stop any substantial transactions, pending the outcome of the OPG investigation, as part of their own safeguarding measures. If your father is well enough, involving him in those conversations could help.

Bear in mind that if the LPA is revoked, alternative provision will be required, (assuming your father lacks capacity to make a new LPA). Most likely a deputy will be appointed by the court. You, or another family member or friend you trust, may ask for the role, but it can be onerous and you will need to report annually to the OPG. Alternatively, a professional such as a solicitor can be appointed.

Finally, you mention deciding with your sister that your father should move into a care home. Don’t assume you have authority to make this decision for him, unless there is also a health and welfare LPA (as opposed to a property and financial affairs LPA) or deputy in place. The relevant legislation aims to empower individuals to make their own decisions where possible and, at the very least, your father’s views on where he lives should be considered.

The opinions in this column are intended for general information purposes only and should not be used as a substitute for professional advice. The Financial Times Ltd and the authors are not responsible for any direct or indirect result arising from any reliance placed on replies, including any loss, and exclude liability to the full extent.

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