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Following my mother’s death, my aunt has sole power of attorney for my grandmother’s welfare and financial affairs. I am concerned, however, that she may be abusing that position, siphoning off regular funds to her and my cousins, without my grandmother’s knowledge. My grandmother is 91, lives in a care home and has dementia. What options are available for us to help her?
Katherine Pymont, senior associate at law firm Kingsley Napley, says that, sadly, financial abuse is a growing problem. It is not uncommon for attorneys to be found making decisions in their own interests rather than the interests of the person they are supposed to protect. There are several steps you could take rather than confront your aunt yourself, or as well as doing so.
In England and Wales, there are two types of lasting power of attorney for when people lose the capacity to make decisions themselves: one covers health and welfare, and the other property and financial affairs. Different arrangements apply in Scotland and Northern Ireland.
A lasting power of attorney must be filed with the Office of the Public Guardian (OPG) while the maker still has full mental capacity.
The OPG is also your first port of call if you have suspicions about the actions of an attorney in office that could amount to an abuse of power. Based on your concerns, I would suggest that you contact them. The OPG will investigate and if the evidential position is sufficient to support the concerns the likely outcome is that your aunt’s power of attorney would be revoked.
A deputy appointed by the Court of Protection would then become responsible for your grandmother’s affairs. Alternatively, if you have sufficient evidence that your aunt is not acting in your grandmother’s best interest or complying with her duties as attorney, you could consider making an application to the Court of Protection yourself asking the court to remove your aunt as attorney and appoint a deputy in her place.
If your grandmother has been the victim of financial abuse, once it has been stopped, thought will need to be given to the possibility of legal action against your aunt. Depending on the sums involved, it may be necessary to report her to the police for fraud or theft, and pursue civil proceedings to recover the assets. A deputy would require authority from the Court of Protection to litigate on behalf of your grandmother. If your grandmother were to pass away before the funds were recovered, then a claim may be brought on behalf of her estate to recover the assets.
The volume of funds taken will be a key factor in determining the proportionality of how far to pursue matters. It would not be in your grandmother’s best interests, or the beneficiaries of her estate, to aggressively pursue civil proceedings if the value of the potential claim does not justify the associated legal costs or the prospects of recovery are low (because the money has already been spent and your aunt does not have any assets of her own).
My wife and I have just paid the last payments on two properties and are in so much confusion over how we can pass on these properties to our children who are both in their twenties and live at home with us in one of the properties. One property is worth more than the other, hence why we want each of them to be given equal shares in both properties. Could they purchase them from us for a ridiculously low amount or have we got to proceed down the “gifting” route?
Rebecca Fisher, a partner in the private client team at law firm Russell-Cooke, says many families face a similar dilemma when it comes to intergenerational transfers of property. I am assuming that one property is your main home and the other is either a second home or investment property. There are three main tax considerations when looking to gift or sell property that should factor into your decision-making. These include inheritance tax (IHT), capital gains tax (CGT) and stamp duty land tax (SDLT).
Where there is a gift of property and a benefit is retained by you, HMRC will consider the value to still be in your estate for IHT purposes. That benefit may either be you continuing to live in the property or receiving rental income. There are some exceptions to the rule for sharing your main home but the rules are complex and you would need specialist advice to avoid any IHT traps.
If you have lived in your home since you bought it you will qualify for principle private residence relief (PPR). If PPR applies then there would be no CGT on either a sale or gift of your home to your children. This should be contrasted with the second property. It is important to note that if you sell the property at a low value this will be considered part sale, part gift. CGT would still be assessed on the market value of the interest you transferred or sold at the date of the transfer. The CGT rate is 28 per cent on land and buildings for higher-rate taxpayers.
This would also be a “dry” tax charge if you make a gift — meaning there would be no sale proceeds from which to pay the tax. The CGT position will depend on whether it has increased in value since the date you purchased the property and by how much.
When making any gift, you still have to live for another seven years or the value will remain in your estate for IHT. In the worst of all worlds, you could have paid CGT when you made the gift and then IHT becomes payable on your death.
Our next question
I have been married for two years and we live in my wife’s flat that she purchased before we married. We now plan to purchase a family home, without selling the flat, to be chain-free buyers. As my wife bought the flat, I will be putting the deposit down for the house. I believe the proceeds from a sale of the flat should be divided up, but I don’t know how to protect my interests in the event of a divorce. What are my options?
SDLT is another potential issue. If your children do not currently own a property and you transfer a share of your property to them, they will then have what’s called an “interest in land”. If they subsequently wish to purchase a property of their own, they will have to pay higher rates of SDLT.
Finally, it is important to flag the risks of transferring any interest in your home to a third party. If those co-owners were subsequently to divorce or become bankrupt, the ownership of your home could be at risk. From experience, a lot of parents tend to be reluctant to take that risk. In this case, perhaps the initial focus should be on whether it is tax-efficient to transfer the second property to your children.
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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