Financial Ombudsman issues guidance on Powers of Attorney

Registering a power of attorney can often be a stressful time for all those involved but recent reports have revealed that the situation may be further exacerbated by financial institutions failing to recognise powers of attorney at critical times, particularly when a loved one has lost their mental capacity.  In response, the Financial Ombudsman has issued guidance, tips and information about handling difficult situations.  The information is intended for consumers and banks and can be accessed via the Financial Ombudsman website.

A key focus of the resources designed by the Ombudsman for financial institutions is on helping banks understand the stress that a Donee (the person registering a power of attorney) could be under and how they can avoid issues that may lead to complaints against the bank.  The informative website also explains what a power of attorney is and when it might be used.

Consumers can also refer to the website to better understand the requirements of their bank to enable a power of attorney to be registered.

The aim is to resolve many of the misunderstandings around powers of attorney which tend to be at the root of the problems that arise.  Although some situations will still require further help from the Ombudsman, the Office of the Public Guardian and the Courts, it is hoped that this new guidance will help bank staff talk through the options with customers and their loved ones, helping them to better serve the interests of a Donee dealing with dementia or other conditions that may affect their mental capacity.

BLM Blogs are not meant, or designed, to offer personal advice; for advice in relation to your own situation, please contact us.

The Inheritance and Trustees’ Power Act 2014

Last year we saw significant changes to intestacy rules and trustee’s powers introduced by The Inheritance and Trustees’ Power Act 2014.  Whilst the changes have been welcomed in the main, a client’s intentions may not come to fruition without a thorough and regular will review and, in many cases, this should be done in coincidence with independent financial advice.

Now, more so than ever, it’s vital for clients to have a will in place to ensure that their assets are dealt with according to their wishes when they pass away.  Whilst spouses stand to benefit from the new rules, co-habiting partners and step-children, in particular, will receive nothing if a will is not in place.

What has changed?

Intestacy rules govern how a deceased’s estate will be divided if a valid will is not in place.  In summary, the changes mean that:

  • If the deceased has no children, then their spouse or civil partner will receive 100% of their estate outright. Prior to the changes, parents or siblings may have been able to claim a share of the estate.
  • If the deceased has children, then their spouse will receive;
    i) all ‘personal chattels’
    ii) £250,000 outright (or the entire estate if the value is less than this amount)
    iii) 50% of the remaining balanceThe remaining 50% will be inherited by the deceased’s biological or adopted children.  If under the age of 18, their share will be held in trust until they reach the age of 18.
  • The £250,000 level will be reviewed at regular intervals to keep pace with inflation.
  • The definition of ‘personal chattels’ has been simplified to include any tangible moveable property, such as jewellery or furniture. This definition has three key exceptions:
    i) money and securities
    ii) assets used solely or mainly for business
    iii) assets held solely or mainly for investment purposes

Whilst these changes benefit spouses, they may not always reflect the wishes of the deceased.  For example, they may prefer their children to inherit only when both parents have passed or they may wish for step-children to receive a share of their assets.  These kind of specific requests must be dealt with by a will as they are not accommodated under current intestacy rules.

Pension Death Benefits

Alongside a will review, your client’s pension death benefit instructions should also be reassessed, particularly in light of the Government’s recent abolishment of the 55% tax charge upon death.  These changes have made it possible for savers to pass on their pension as inheritance, making it a more attractive investment proposition.