Inappropriate transfer of funds query.

[JohnnyK]

I am concerned that my Dad and my sister have acted irresponsibly with regards to my Mum's finances but as I am the only one in the family who is concerned I need to get a feel if I’m right or not.

My Mum has AZ and the whole family agree she is now unable to look after her financial matters. She lives with my Dad who is her carer. My brother, sister and I are joint LPAs for both health and financial (Dad isn’t).

25 years ago Dad’s mother died and left to him by name approx £300,000 worth of shares. Mum and Dad were both executors of the will and somehow this ended up with both Mum and Dad being recorded as being on the share certificate and my understanding is that for 25 years these shares have therefore been in joint name. Mum and Dad have been married for over 50 years.

Mum’s AZ has deteriorated considerably recently and she is due to have a financial assessment. Dad wanted Mum’s assets to be worth less than 23k so he got my sister to persuade Mum to sign her half of the shares over to Dad (Mum would have had no idea what she was signing and my sister would have told her something along the lines of it meant the money would go to the children). The signature was accepted and the transfer of ownership has been made.

I have discussed this with my brother and sister but they both feel what was done was right due to a) the fact that the money was left to Dad in the will and it is simply being returned to him as his mum wanted and b) that we needed to get Mum’s money to under £23k so we didn’t ‘waste’ the money on care costs if this could be avoided. (until the financial assessment is made we don't know if they will pick up on this matter)

I feel that what Dad and my sister have done is wrong for the following reasons.
1) The shares were legally in joint name and as Mum no longer has capacity to decide what to do it was down to us as POAs (we have to act in unison on such matters) to decide what to do. I feel that to get a family member to get her to sign something she clearly didn’t understand is not appropriate.
2) Even if Dad had a strong legal case that the shares should be his, it is not appropriate for him to be the one deciding this. Mum would at least have a case along the lines of ‘they are in joint names and have been for 25 years and as we have been married all that time I consider I own a half share’.
3) If we three POAs soon decide that Mum needs to go into a care home and either the local authority won’t fund because she doesn’t meet their criteria on health or financial grounds then we no longer have any funds for this. Prior to Mum signing the shares away we would have had access to this money to pay for care home costs for a few years. Dad has made it clear he doesn't want to use the shares to pay for care home costs.

Does anyone have any view on this? If these actions were inappropriate and these shares should be available for Mum’s benefit could there be any legal avenues open to me?

 

[nicoise]

What a pity this wasn't sorted out at some point during the preceding 25 years.

Whilst sorting this out now isn't "strictly" depriving your mum of her "rightful" capital, as you suspect it wouldn't read well on a financial assessment as it has been done since her diagnosis.

An attorney should be acting in the donor's best interests - in this case that certainly hasn't happened, as she has been persuaded to give away an asset, potentially without fully understanding what she has done.

Whilst we would all like to have care paid for by the Local Authority, if a person with dementia has their own funds, it does afford a level of choice.

As things stand, should your mother go into residential care and need funding by the LA, what they will do is to offer you the potentially one place they fund at their limit and not several places. This might be many miles from her home, and not be where you might wish your mother to live.

Equally, she may never need residential care, or you as a family might decide to meet her needs yourselves so that the situation might not arise.

I would suggest that taking legal advice would be wise in order to clarify that the shares were indeed your father's by inheritance, and whether her co-ownership of them was by default, and thus the 50% share should not fall into your mother's assets should a financial assessment be needed.

That your gut instinct is ringing alarm bells suggests you already feel uncomfortable, and that your co-attorneys are willing to go behind your back. A difficult place to be, but hopefully this is the only action of this nature they can take, and that your mother's best interests rather than saving money will matter more to your family as it seems to you.

 

[Kevinl]

I'd do nothing. The biggest risk is that you'll fall out as a family over this and probably achieve nothing. You are from the sound of it unlikely the change you dad or your sister's minds so there really is very little you can do to change things other than report it to the Court of Protection and ask for their opinion; costly, time consuming and probably the final nail in the coffin of your family relationship.
Money I have inherited and put in a joint account immediately became half hers for assessment purposes, likewise all my earnings when my wife was unable to work.
If the LA do an assessment and find out about the shares I can't see how they could see it as anything other than a deprivation of assets, 25 years ago a husband and wife put an asset into joint names (be it cash, shares a house or whatever) then this situation comes up and suddenly it was done by "accident", you can see how it might smell a bit fishy.
Will the Tax people be advised of the transaction and are there any implications; income tax, capital gains tax or whatever if they see it as her "giving" him £150K in shares?
Hopefully someone who's done it will be along with some first hand experience but remember things that were "let go" in the past are being looked into a lot harder in these more austere these days and if the LA decide it is a deprivation then she will be assessed as if she still has the money.
K

 

[Shedrech]

hi JohnnyK
whatever happened in the past, I am concerned about this

what to do it was down to us as POAs (we have to act in unison on such matters) to decide

if by this you mean that POA was granted for you and your siblings to act JOINTLY in every matter, then they have gone against that in acting as they have
if, however, you are Attorneys jointly and severally, then one Attorney can act individually, though it seems your expectation is that you all agree and act together

you say your mum no longer has capacity to make these decisions - so it's not acceptable for her to sign any documents - any of her affairs should be dealt with by her Attorneys and signed by her attorneys on her behalf - it can't be had both ways, surely

I do fear that the LA will consider this a deliberate deprivation of her assets; it was after all done to take her personal assets below the £23,000 mark so she isn't paying for any care, and done after your mum lost capacity

personally I think it's sad that your family think it's a 'waste' to spend money on your mum's care

we needed to get Mum’s money to under £23k so we didn’t ‘waste’ the money on care costs if this could be avoided

I'd rather my dad's money is spent on his care so he has everything he needs now, rather than 'waste' it on some frippery when he's gone and anything left has become my inheritance - my dad's always been proud that he paid his way as an adult and made a good life for his family, he'd not be happy to not pay his own way whilst he still has assets

I agree with nicoise, you need some professional advice - or, yes, you can do as Kevinl suggests and do nothing for the sake of family harmony (having fallen out with my family, I really do know how much that is worth) and see if the LA notice this when making their assessment (you could even just happen to accidentally mention your mum used to have some shares)

best wishes

 

[Beate]

Where do I start with the wrongness!

1. If everybody agreed that Mum is no longer able to look after her finances then she should not have been made to sign something she didn't understand. This signature is basically invalid. If any transfer was done, it should have been done with the attorney's signatures.

2. If this is a joint LPA and not a joint and several one, they have acted incorrectly in not involving you and accepting your stand. In such a case, all signatures would have been necessary, and as yours is missing, the transaction should not be valid. They have got around this by getting your Mum to sign which is not ok.

3. It might have been your Dad's inheritance but by allowing it to be in joint names for 25 years, your Dad has basically gifted half to your mother. I can't see how a local authority is going to accept a sudden change of heart after 25 years. They will see it as deprivation of assets, as it is solely done to avoid care costs.

4. It is not acceptable to make any financial manoeuvring with the simple goal of saving money on care costs. This, apart from being deprivation of assets, is also not in your Mum's best interests, as it will limit her care home choice to the one SS are willing to finance. Even then a top-up might have to be paid. Care homes are expensive so the council-chosen one might not be the best. With £150,000 to her name, she could afford a much better one.

You should seek professional advice. Doing nothing is not an option because you as one of the joint attorneys have a duty to act in her best interests, and if you let the other attorneys get away with it, you're basically making yourself complicit in any unsavoury actions. And getting someone without capacity to sign a document is definitely unsavoury, if not downright fraudulent.

 

[nitram]

I agree with Beate, doing nothing is not a sensible option, as attorney you have a legal duty to ensure your mother's finances are correctly handled.

I doubt if you will get far with legal advice, the £150000 has been in your mother's account for 25 years and in the absence of some form of trust deed your father has no claim to it. A solicitor instructed by you is more likely to advise that you try to convince the other joint attorneys of their error and reinstate the funds than start investigating what happened 25 yeas ago.

Your mother chose the three of you to jointly handle her financial affairs and that is how you all must act, if you can't all agree on an action then it should not happen. Your father has no say in the matter, your mother could have chosen him as attorney and the three of you as replacement attorneys, if it is an EPA this would have required a clause inserting.

 

[LYN T]

As well as the good advice given by Beate and Nitram, you are correct in questioning the morality of the action in transferring the shares. To be honest anyone who engages in this kind of practice should be ashamed of themselves. As has been mentioned your Mum's choices will be very narrow when at the mercy of the LA (if she needs residential care in the future). Your Mum is vulnerable and needs protecting.

Do the right thing and see a Solicitor-you have your Mum's best interests at heart and I would hate for you to be implicated by doing nothing.

A terrible situation for you to have to handle though-but even worse for your Mum if she hasn't the funds available to help pay for her care.

Good luck

 

[Katrine]

What a terribly sad start to your new year. I just cannot express adequately how I feel, but you have my utmost sympathy. When people see money as an end in itself, rather than a means of providing for their nearest and dearest, then there's no getting through to them on the grounds of morality and decency. Their self-justification, compounded with secret feelings of guilt, is likely to cause them to turn on you.

Does the stockbroker know that there is an active POA? I suspect your Dad and sister kept quiet about that, otherwise the transaction would not have gone ahead with your mum's signature. I would contact the stockbroker to notify them of the POA and to find out how you can get the transaction reversed. Of course, if the POA is joint, not joint and several, you yourself cannot instruct the stockbroker unilaterally. However, they can advise so that you can notify your siblings of what needs to be done.

To be honest, if both the other attorneys are complicit in this fraud then they are not fit to be financial attorneys. You could apply to the COP to have them removed, so that you become sole financial attorney. This may not be possible; sometimes the Court feels that such a situation would be unworkable due to ongoing family friction. In those cases a financial deputy has to be appointed, perhaps a solicitor. All of that costs a lot of money and this is the last thing your mum needs from the POV of having her assets further depleted.

The best option would be for your siblings to have a wake-up call about fraud and to get this share ownership transaction reversed. In addition, any further funds in joint name with your Dad should be separated out immediately into a bank account in your Mum's sole name, with attorney access. Pension payments etc. must go into an account that your Dad cannot touch, since unfortunately he cannot be trusted. Such attitudes to women and property belong in the pages of a Victorian novel.

 

[JohnnyK]

Thank you everyone, the overall tone and content of the replies has reassured me that my concerns were well founded.

It is a horrible situation to be in. Dad is not coping well with his role as carer and a few months ago had a breakdown when it all got too much for him. I feel utterly trapped because on the one hand I don't want to be potentially complicit in fraudulent activity by inaction and leave Mum without the funds for a decent local care home, and on the other hand be the cause of Dad having another breakdown - or worse. The bottom line though is I love my Mum, she's made me a POA alongside my brother and sister to look after her interests and I will have to find a way through this.

 

[Beetroot]

The share portfolio would have given rise to income. It might give you some back up by knowing who showed what income on their tax returns - e.g. 50:50 split, or all on Dad's. Did either parent make a claim for repayment of tax based on their share of the income? Who declared capital gains or losses arising in the portfolio on their tax return? Father, or both parents half each?

Maybe send your co-attorneys a copy of the Mental Capacity Act Code of Practice (download here - https://www.gov.uk/government/publications/mental-capacity-act-code-of-practice ) and refer them to the relevant chapters - so that they understand they have statutory responsiblities.

 

[arielsmelody]

I'd agree that if your mum & dad have held the shares in joint names for 25 years, they are joint assets and your mum is entitled to half - and the people holding LPA for your mum should act in her best interests (not your dad's) and not allow the money to be given away. I'd be really surprised if the financial assessment didn't include a question about any recent transfers of shares etc.

I think your family have put you in a difficult situation - if you are one of the people with power of attorney and you have discovered that your mum has been manipulated into signing away money when she doesn't have mental capacity to do so, that doesn't sound good at all.

You haven't said whether your mum has pension income? Does she need care visits at home or residential care? If she goes into residential care, her share of the family home should be disregarded while your dad is living there, but if the LA will want almost all of that pension as a contribution, so if she has a weekly income of more than the LA's funding limit, usually around £500 per week, she will be self-funding anyway.

 

[Saffie]

I'd agree that if your mum & dad have held the shares in joint names for 25 years, they are joint assets and your mum is entitled to half - and the people holding LPA for your mum should act in her best interests (not your dad's) and not allow the money to be given away. I'd be really surprised if the financial assessment didn't include a question about any recent transfers of shares etc.

I think your family have put you in a difficult situation - if you are one of the people with power of attorney and you have discovered that your mum has been manipulated into signing away money when she doesn't have mental capacity to do so, that doesn't sound good at all.

You haven't said whether your mum has pension income? Does she need care visits at home or residential care? If she goes into residential care, her share of the family home should be disregarded while your dad is living there, but if the LA will want almost all of that pension as a contribution, so if she has a weekly income of more than the LA's funding limit, usually around £500 per week, she will be self-funding anyway.

That's not strictly true. Whether a person self-funding or not depends on their capital rather than their weekly income. If a Care/ Nursing home's fees are more than that which the LA will contribute then a top-up might be required if there is a suitable cheaper home approved by the LA. The amount of weekly income just means that the LA will have to contribute less if the total amount is more, as all income bar around £24 or so - some LAs allow extra - will have to be contributed.
Of course if the weekly income covers the fees then that is a different matter but
nursing homes around here charge fees that are double that £500.

We do seem to be seeing more of these problems with siblings accepting whose money it is when one would like to think that the care and wellbeing of the parent should be paramount. This is so sad.
Best wishes to you in your efforts to resolve this.

 

[jugglingmum]

The share portfolio would have given rise to income. It might give you some back up by knowing who showed what income on their tax returns - e.g. 50:50 split, or all on Dad's. Did either parent make a claim for repayment of tax based on their share of the income? Who declared capital gains or losses arising in the portfolio on their tax return? Father, or both parents half each?

This is good advice - it is possible to only be entitled to income and not capital, but I think you needed to declare the position to HMRC - this used to be a specifice husband and wife tax rule. I'm not sure if it has been scrapped under anti avoidance rules.

If capital gains and losses have been declared on mum's tax return then she is the owner of them for both capital and income purposes.

It may be worth taking advice from a decent sized firm of accountants with the relevant tax specialists on this one point.

If there is nothing in writing to show that mum was only entitled to income then she owned the shares outright and transferring them to dad when she lacks capacity sounds like a criminal act to me.

 

[nitram]

It is likely that the £300000 inheritance was put into joint ownership to give two bites at the annual CGT exemption cherry.

 

[jugglingmum]

It is likely that the £300000 inheritance was put into joint ownership to give two bites at the annual CGT exemption cherry.

I agree this is a possibility - although more likely to get the IHT limit split if prior to transferability of IHT between married/civil partners.

I have seen several instances where the wife gets the income but doesn't have entitlement to the capital, often on rental properties, but also joint bank accounts BUT there was a form that had to be filed with HMRC to confirm that it was income only otherwise HMRC treated it as capital as well. So income was put on wife's tax return but capital gains and losses went on husbands (of course it could be the other way round, but with older couples I've seen it was this way round).

 

[Beetroot]

It seems this still applies JM - I've found this:

http://www.rossmartin.co.uk/land-a-property/536-joint-property-elections

I can't imagine there's such an election in this case.

Another point worth looking at is who manages the portfolio? If it's a professional firm or a bank, there will be a contract/agreement of services/engagement letter. Who signed it? One parent or both?

 

[JohnnyK]

I can't answer some of the specific questions about tax returns and who manages the portfolio etc and could only do so by asking Dad. Depending on how I proceed this may well become necessary but to do so now would most likely create a rift and be detrimental to his health.

I'm thinking one way forward could be to speak to my brother and sister, perhaps show them this thread. Then get an agreement from them that this transfer shouldn't have happened and that we should explain this to Dad and ask for a commitment that he will make these funds available for Mum's care should they be required.

Mum is currently having a needs assessment and is under the older people's mental health team for severe depression (she says daily she doesn't want to be alive). She has not been having carers come in as help dressing/showering as been done by family members recently but she is so low that family members have started asking if she would be happier in a care home. I'm guessing the LA are unlikely to consider this as a clinical need at present which is why the issue of Mum's shares is so important to me.

 

[nitram]

Discussing the situation with you brother and sister is essential.

If the LA do a financial assessment they will ask the attorneys about any recent transfers out of your Mum's account, to prevent this happening the attorneys can refuse an assessment in which case your mother will be self funding.

If there is an assessment and the LA decide there has been deliberate deprivation of assets they will first try to get the funds transferred back and if that does not happen add them as notional capital to your Mum's funds which would then be above the upper limit.

A commitment from your Dad may work but be prepared for the unexpected happening. Who has LPA for your Dad, what does any Will say?

The transfer appears to have been made without any consideration of legal or beneficial ownership, the purpose being to avoid 'wasting' money on care costs. It also appears that your Mum may not have had capacity to understand the full implications of the transfer when she signed - potentially not being able to self fund and have to rely on LA funding.

Other than removing the funds from your Mum's assets so that they will not be included in any LA assessment what advantage does your Dad have in ownership?

 

[jugglingmum]

It seems this still applies JM - I've found this:

http://www.rossmartin.co.uk/land-a-property/536-joint-property-elections

I can't imagine there's such an election in this case.

Another point worth looking at is who manages the portfolio? If it's a professional firm or a bank, there will be a contract/agreement of services/engagement letter. Who signed it? One parent or both?

Reading the link the election can apply to investments as well as property, HMRC changed their guidance in 2011. Nicola Ross Martin is normally very good, I do like her articles when relevant to my line of work, so this is the correct position.

If the shares are in joint names the election would apply, however if the portfolio was split in 2 originally so some were in father's name and some in mother's name then this does not apply and there is a definite transfer of assets.

This sort of tax planning is normally only used by those with good advisors, and if this election hasn't been made I think you can take it that your mother owns the shares outright - I suspect she does, but just wanted to highlight a possibility where she would only be entitled to the income.

I do think what has been done is underhand, deprivation of assets, and needs to be reversed, unless there is evidence to say she was only entitled to the income.