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Where Taxpayers and Advisers Meet

Attorneys and PETs

sigmund
Posts: 64
Joined: Mon Nov 02, 2009 10:03 pm

Attorneys and PETs

Postby sigmund » Fri Feb 14, 2020 3:26 pm

On my wife's death I will inherit her stocks and shares ISA portfolio which will be free of inheritance tax, together with any outstanding IHT allowances she may have.

Our two children hold power of attorney for me. I plan to encash the ISAs (free of capital gains tax) at an appropriate time and to gift the proceeds equally to our two adult children as PETs. If I am unable to do so, then I want my attorneys to do so on my behalf. Will writing a letter of my intent be sufficient to enable our children, as my attorneys, to gift the proceeds of the ISAs to themselves as PETs on my behalf?

state.revenue.contributor
Posts: 3
Joined: Wed Sep 18, 2019 12:38 pm
Location: UK

Re: Attorneys and PETs

Postby state.revenue.contributor » Fri Feb 14, 2020 4:47 pm

I assume your children are your Attorneys under a Property and Financial Affairs LPA (not Enduring Power of Attorney). They will have a limited ability to make gifts on your behalf (see Mental Capacity Act 2005):

1. To people (including themselves) who are related to, or connected with, you on ‘customary occasions’.
2. To any charity to which you made, or might have been expected to make, gifts.

The value of the gift must not be unreasonable taking into account all the circumstances, in particular the size of your estate at the time. Also, in LPAs donors can restrict the attorneys’ ability to make gifts, but cannot extend it. Your children would need to make an application to the Court of Protection for an Order authorising any gifts which are beyond their authority, which is both costly and time-consuming. Your suggested letter may assist their application though.

HTH.

sigmund
Posts: 64
Joined: Mon Nov 02, 2009 10:03 pm

Re: Attorneys and PETs

Postby sigmund » Sat Feb 15, 2020 12:10 am

Thank you for your very prompt reply. Our adult children are my attorneys under a Property and Finance LPA. The amount concerned will be very substantial, but would only represent 25% of my new total estate. Is there any other way of transfering the encashed inherited ISAs to them as PETs should I lack mental capacity at the time?

sigmund
Posts: 64
Joined: Mon Nov 02, 2009 10:03 pm

Re: Attorneys and PETs

Postby sigmund » Sat Feb 15, 2020 2:23 pm

Would the following letter of intent, signed now, suffice to enable my Attorneys to do what I want:

To Whom it May Concern

Should I inherit my wife's ISA portfolio, I intend encashing those ISA holdings and transferring the total proceeds to my two daughters .......... and ..........
in equal amounts as Potentially Exempt Transfers. However, should I lack mental capacity to do that, then I instruct my Attorneys, who are also my two daughters .......... and ............ , to do so on my behalf.

Yours faithfully

AGoodman
Posts: 942
Joined: Fri May 16, 2014 3:47 pm

Re: Attorneys and PETs

Postby AGoodman » Mon Feb 17, 2020 4:19 pm

No, an attorney can only make the gifts mentioned above. There are no exceptions or facility for pre-consent.

If you are planning to gift them immediately then the ISA wrapper is unlikely to be helpful (the investments' base cost will be lifted to probate value and your children cannot use the ISA wrapper). In that case, your will could leave the ISAs on trust for you for life with an overriding power of appointment. That would secure the IHT exemption. Your children, as executors, could then exercise that power after a suitable period (say a year) to redirect the trust fund to themselves).

This solution needs some admin (you would have to register the will trust for example) but it would be easier than an application to the CoP.

AGoodman
Posts: 942
Joined: Fri May 16, 2014 3:47 pm

Re: Attorneys and PETs

Postby AGoodman » Mon Feb 17, 2020 4:27 pm

I meant your wife's will rather than your will.


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