Power of Attorney Changes to Change Estate Tax Plans – ‘Problems with HMRC’ Could Occur | Personal Finances | Finance
The costs of inheritance taxes can be managed through effective use of estate planning, which can range from creating wills to setting up APLs. On the latter, the government recently confirmed that it was seeking to modernize the entire LPA system.
On July 20, the Department of Justice and the Office of the Public Guardian announced that they plan to make the LPA service “safer, simpler and more suitable for the future.”
They noted that the number of registered LPAs has increased dramatically in recent years to over five million, but the process of creating an LPA retains many paper-based features that are over 30 years old.
In response to this reality, a 12-week consultation was launched to examine the entire process of creating and registering an APL – with a view to strengthening the powers of the Office of the Public Guardian (OPG) to prevent fraud. and abuse while introducing a primarily digital service system.
This, the government explained, will examine how technology can be used to reform the witnessing process, improve access and speed up service.
READ MORE: Inheritance Tax: HMRC Updates A Number Of Forms And Contact Information
The government explained that an LPA is a legal document that allows people to appoint someone else (a lawyer) to make decisions about their welfare, money or property.
They are often used by older people to choose someone they know and trust to make decisions for them if they lose their abilities in the future and Nick Goodwin, a public guardian for the England and Wales, commented on their importance: taking the vital step in planning for the future by applying for a lasting power of attorney, and we want to make sure it’s as safe and straightforward as possible to do so.
“This consultation presents proposals that will allow us to adapt the service to the modern world – a service accessible online, and which grants OPG the power to perform in-depth checks to protect against fraud while allowing people to raise more easily their concerns. “
More specifically, the consultation will focus on:
- How does witnessing work and whether remote witnessing or other safeguards are desirable.
- How to reduce the risk of an LPA being rejected due to avoidable errors.
- Whether OPG’s mandate should be broadened to have the legal authority to perform other verifications such as verification of identification.
- How people can object to a PLA and the process itself, as well as when is the right time to object.
- Whether a new urgent service is needed to ensure that those who need an LPA granted quickly can get one.
- How lawyers access the service and how best to facilitate it.
Rachael Griffin, tax and financial planning expert at Quilter, reflected on the announcement and urged families to act.
Ms Griffin said: âThe lawyer for an APL should always act for the benefit of the donor and that would not include IHT planning.
“However, if a person has lost capacity and IHT planning is required, authorization from the protective court may need to be sought.
“If possible, it’s best to get IHT planning in place as early as possible, and planning for an LPA often prompts someone to get their affairs in order sooner.”
Kim Jarvis, technical director at Canada Life, also issued a warning about how LPA issues could lead to issues with HMRC.
Ms Jarvis said: “By appointing a lawyer, you are authorizing someone else to make decisions about your welfare, money or property, but you must keep in mind that a lawyer has powers. limited donations.
âWhile the law allows a lawyer to give small gifts (for birthdays and customary occasions), many lawyers will want to give more substantial gifts.
“If the lawyer wants to donate more than what is allowed under the law on mental capacity or the power of attorney, it is necessary to obtain the sanction of the protection court. If the sanction of the protection court is not obtained, then HMRC will not accept the gift as valid for inheritance tax purposes.
“A lawyer can give gifts to cover the annual exemption of Â£ 3,000 and the annual small gifts exemption of Â£ 250 per person up to a maximum of 10 people – when:
- The donor has a life expectancy of less than five years,
- Their estate is worth more than the zero rate band of Â£ 325,000,
- Gifts are affordable, taking into account the costs of the donor’s care, and will not adversely affect their level of care and quality of life and
- There is no evidence that the donor would object to the donation being made.
“The situation where a donation of this nature would be appropriate is if the donor was wealthy and it was desirable to make transfers in an attempt to save IHT. The Protection Court can sanction such a donation as long as it does not go. prejudicial to the payment of care home fees to the donor. Like the donor, lawyers should seek advice before undertaking any estate planning. “