When a person’s affairs are being managed by someone else under a lasting power of attorney (LPA), there are strict rules about what the attorney can and cannot do with the assets placed under their control. The attorney is expected to safeguard the assets of the person who gave them the LPA and their own withdrawals should only be for what is reasonable and necessary.

However, that does not mean they are completely restricted as to what they can do. If they can show that the person they are acting for would want them to make gifts or take an action that benefits them or others, then doing so may be possible, as a recent case demonstrates.

It involved an attorney who is the son of a very wealthy woman who has advanced dementia and has lived in a care home for several years. With her death expected to be some years away, the current liability to Inheritance Tax (IHT) were she to die would be more than £6 million. Her assets are very considerably in excess of any reasonable expectation of her financial needs for the rest of her life. Her son, the attorney, stands under her will to inherit some £17 million before IHT, after specific bequests of about £1 million.

The attorney and the other beneficiaries under the woman’s will reached a negotiated position whereby £6 million of her estate would be given to him. The reason for so doing is that the IHT burden is likely to be reduced (by up to £2.6 million) if the woman survives until 2025.

The arrangement had to be approved by the Court of Protection, which, having heard evidence concerning the woman’s desire to reduce taxes and to make gifts out of her assets, agreed that it would be in her best interests to allow the scheme to go ahead.

Source: Private Client Library Content