Changes to Lasting power of Attorney for Financial decisions.

Discussion in 'I care for a person with dementia' started by Bod, Nov 24, 2015.

  1. Bod

    Bod Registered User

    Aug 30, 2013
    1,112
    Talking to a financial advisor, a comment was made that attorneys now could not dispose of capital. Something to do with HMRC?
    Using PoA, we wanted to set up a Loan Trust, a few weeks ago this wasn't a problem, but this week, it is.
    Anybody else heard of this?

    Bod
     
  2. jugglingmum

    jugglingmum Registered User

    Jan 5, 2014
    4,913
    Female
    Chester
    I have googled Loan Trusts and they are a complex wrapper designed to minimise/avoid IHT by taking the growth on the assets out of the person's estate, so there is no giving away of capital on the initial loan, only if the loan is waived (which appears to be an option). They are likely to be worthwhile if held as a long term investment, not short term. HMRC have a habit of getting upset about any IHT planning(avoidance) and have legislated retrospectively on some schemes.

    There are no HMRC rules on giving away capital and HMRC are only interested in the tax position.

    But if a person has no capacity their assets have to be managed in their best interests to maintain them, so divesting of capital is not maintaining their assets in their best financial interests and discretionary decisions cannot be made on their behalf. If likely to be self funding then this can cause problems, although if at the level of assets to be considering IHT avoidance this may not be an issue.

    A financial adviser is not tax trained and so anyone considering a product of this nature should only go into it with good quality IHT advice from a suitably qualified tax practitioner (Reputable firm of accountants or tax advisors)

    If it is with the same adviser it sounds like he has had a chat with colleagues about something he wasn't sure about.
     
  3. nitram

    nitram Registered User

    Apr 6, 2011
    18,287
    Male
    North Manchester
    I too googled and came to the same conclusion about the advisor having second thoughts.

    The COP could also be involved, if you go to various providers you get a range of statements as to whether COP approval has to be sought, it's all to do with gifts from the donors estate.
     
  4. jugglingmum

    jugglingmum Registered User

    Jan 5, 2014
    4,913
    Female
    Chester
    I noted on my google that many financial institutions are offering these. One of the issues I know that my firm has come across with our IFA's is that if we offer complex products such as these we are obliged to make sure the person taking them out has the ability to understand the complexity of these and has understood that complexity as often they appear quite simple on the face of it.

    'Schemes' of this nature, to use HMRC terminology are only worthwhile for wealthy individuals and as such HMRC will take a dim view of anyone who claims they didn't understand them if they later break them through the courts as they consider that they could afford to take appropriate advice.

    On a brief skim through these are in line with the minutiae of UK tax law, but with the GAAR (General Anti Avoidance Act) now implemented you never know when HMRC will take an interest in something they consider sailing close to the wind. With that in mind I would consider a product like this too risky for an LPA to deal with on behalf of the donor.
     
  5. Bod

    Bod Registered User

    Aug 30, 2013
    1,112
    Thanks for the replies.
    Its given me food for thought.
    If you have any questions, it might be better to use the PM system, I'll be able to answer better.

    Bod
     

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