Court of Protection Deputyship
Applying for deputyship is complicated
It takes ages and is very expensive
Gives you limited powers
You may have to make more than one application
Applying to be a Deputy of the Court of Protection when a loved-one has lost capacity
When there is nothing in place to help deal with a persons affairs (either an Enduring or Lasting Power of Attorney) the only option is to apply to the Court of Protection and seek their consent to be the Court appointed Deputy.
We can make that application for you or refer you on to a specialist firm who can offer a full Deputyship service and if necessary they can act on behalf of your loved one.
Making a Court of Protection application is not for the feint-hearted. It can take 6 weeks to get the first part done, and they will aim to complete and issue second part, the Order within 21 weeks of that, so bank of 6 months.
Then there is the cost, you will need to pay a professional to take you through the process, there is a Court application fee and you will probably have to take out an annual surety bond. This protects or insures the assets of the person who has lost capacity, the larger the estate the higher the risk, the more it will cost.
As the Court appointed Deputy you will be responsible for making decisions on behalf of the person who has lost mental capacity according to the ‘best interests’ principles of the Mental Capacity Act 2005.
You will need to submit an annual report to the Court that accounts for your actions during the year, it is not that simple.
The Deputyship authority may be limited as to what you can and cannot do, and you may have to make further separate applications for example to sell property or invest large sums of money.
As the Court Deputy you should also consider putting in place a Statutory Will for the person who has lost mental capacity, there could be a substantial estate to pass on to other family members so this is also critically important.
There is more information about the Court of Protection here.
Brain Injury Incapacity Disabled and Vulnerable Persons. Alzheimer’s. Dementia
Top 10 Inheritance Tax Tips
- The Annual Exemption – you can give away £3,000 each year, so a couple can give away twice this amount. If you don’t use this allowance one year, you can use it in the next year.
- Gift Assets to your Children – these are known as ‘potentially exempt transfers’ (PET’s) and provided you survive 7 years then the job is done. Who should make the gift? Will you lose control of the asset that you’ve gifted? Well, you can protect the gift in the hands of the recipient so you don’t need to lose total control of it.
- Gift part of your house to your children – after 7 years it is out of your estate for IHT. The trouble is you have to pay full market rent to your children. They in turn have to pay income tax on the rent received. If they sell it they will be liable for Capital Gains Tax (CGT) on the gain on their share, and if you get it slightly wrong the gift will fail entirely. The better solution is for one spouse to sell their half share of the house to the other spouse in exchange for an IOU, which is then gifted to the children as a 7 year PET. After 7 years, half the ‘value of the house’ is out of the estate for IHT, but the married couple still owns the entire house.
- IOU Scheme – as tip no. 3 above but it can be done with any asset, e.g. a share portfolio, second property and so on. When set up properly, the value of the asset will be taken out of the estate after 7 years.
- Deed of Variation (DoV) – say a relative dies and leaves you an inheritance that creates you an IHT liability. Use the DoV procedure to vary that Will after death and set up a Trust to receive the inheritance for the benefit of you, and your family. There are time limits but this works very well if set up correctly.
- Gift out of regular income – if you have an IHT estate and your income is higher than your expenditure, the problem will only get worse as time goes by. Gifting the excess out of regular income to your children is immediately exempt from IHT. The rules can be tricky to implement but this is a very significant exemption if used correctly.
- Business Property Relief (BPR) Scheme – if you hold investment assets in a BPR scheme for only 2 years they will be 100% exempt from IHT. You need to retain these assets until you die but you can get an income and, since you have not given these assets away, you can cash them in at any time if you need to.
- Settlor Excluded Trust – if you want to gift an asset to your children to avoid your IHT after 7 years, but the asset has gone up in value (like a house) and would trigger a CGT liability if you sell it, you could instead set up a Settlor Excluded Trust and transfer the asset to that trust. As you are the Settlor and a trustee you therefore retain control of the asset, but as you will have no benefit from it, given 7 years it will be out of your estate for IHT and you will get holdover relief for CGT as well.
- Discounted Gift Trust – can seem attractive and you can get an immediate IHT exemption for part of your initial investment. The trouble is the portion that is exempt is based on your age and health so it may not be as great as you had wished for.
- Family Protection Trusts (FPT’s) – avoid the problem in the first place. If inheriting from your parents is going to give you an IHT problem, get them to set up FPT’s because with their assets ‘in trust’ you will have the option of borrowing your inheritance from the trust in exchange for a valid IOU so that you get the full benefit of the inheritance without incurring an IHT liability.
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Shirley & Dave Smith
ACMA FIPW STEP Affiliate
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