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Background

We were referred a client (the donor) who had developed Alzheimers disease and moved into a care home in her early 70's she had two adult children, a son and a daughter. The daughter was acting as joint and several attorney along with the solicitor under a Property and Affairs Lasting Power of Attorney. Her son was not an attorney as when she originally drafted the LPA his previously successful carpentry business was suffering during the recession and he was facing bankruptcy, he was also in the process of getting divorced. In her late 60's she had made an outright gift of £400,000 to the daughter who was now acting as the attorney. Her original plan was to wait a few years for her son's situation to stabilise when she would make a balancing gift to him from her substantial assets.

The daughter was acting as joint and several attorney along with the solicitor under a Property and Affairs Lasting Power of Attorney

She had guaranteed pension income from her own pension, a widows pension, state pension and significant investment income. Her guaranteed income was in excess of the care home fees.

She had substantial assets comprising the proceeds of sale of her home (as she was now living in a care home close to her daughter), a long standing investment portfolio with a well known discretionary fund manager (DFM) significant cash savings spread across several banks and building societies and a small unencoumbered buy-to-let portfolio. Despite living in a luxurious care home with fees in excess of £80,000 per annum, she had surplus income of c £50,000 per annum.

Immediate Concerns

The banking arrangements were complex, with a range of different accounts over several financial institutions. Various direct debits needed to continue in respect of the buy-to-let portfolio, but the attorneys needed to be able to manage these on an ongoing basis and separate them from the plans and direct debits that could be cancelled following the sale of the donors primary residence.

The LPA did not contain an express provision for delegating investment decisions and therefore it was not clear if the DFM account could continue in its current form.

The client had approximately 1/3rd of her entire investment portfolio in the shares of a single company. This arose out of her investment preferences as her deceased husband had built up shares in the company he worked for as a senior executive. he had made no effort to diversify the holdings over time. On his death the shares were transferred to the donor who likewise had made no effort to diversify the holdings. The attorneys were keen to apply The Standard Investment Criteria and diversify the share holdings, but were keen to understand the capital gains tax implications of disposing of the shares. The DFM was not able to make changes to the portfolio under the current LPA.

Cash savings at the bank were earning little to no interest and account balances were growing over time.

The existing Investments were previously being managed with a 'Moderate to Adventurous' risk profile, in addition a sizable portion was held in the shares of a single company. The donor did not need to take such risks to achieve her investment goals.

The solicitor was planning an application to the court of protection for permission to make substantial inheritance tax planning gifts, including outright gifts, gifts into a discretionary trust, gifts of surplus income. This was to both improve the inheritance tax position going forward and to make the planned 'balancing gift' to the donors son. They were also applying for a new statutory will to ensure the even distribution of assets between her children on her death which was in line with the spirit of her current will (but due to the unbalanced gifting prior to loss of capacity was not currently the case).