The Family Wealth Discussion
Posted by siteadmin on Wednesday 13th of December 2017.
Does your family talk about its wealth?
It is a simple enough concept but it is more important than it may first appear. Many people can put off this conversation as it can often cause discomfort and even contention within their family and, very often, how even to bring up the subject can be a sticking point too. A conversation about family wealth leads into discussing the estate and what will happen to this estate once the elderly generation is no longer around to take care of it.
Starting the conversation can be easier and simpler than might be expected, Many families will have a treasured family heirloom or two, and discussing to whom these will pass and why could easily lead the family into the discussion about the wider restate.
There are two main factors to consider – what happens when a parent dies and what happens if the parent loses capacity? The two scenarios have two very different outcomes.
Many parents will think that because they have Wills in place that their estate has been taken care of. The family, with the help of their solicitor will manage their affairs on death. But what if the parent is incapacitated in some way and unable to handle their own affairs?
If a parent loses capacity, their estate will be frozen – in other words, bank accounts will be inaccessible, pension drawdowns will fail and nothing can be done with any investments the parent had. With no access to the estate, bills would go unpaid and the family would be unable to pay for care. Additionally, the parent would become the responsibility of social services and the family would have no say on the care they receive, unless they apply for deputyship.
Here’s where Lasting Powers of Attorney come to the rescue. There are two types of LPA – ‘health and welfare’ and ‘property and financial affairs’ – and it is important the parent has both in place to ensure full protection of their estate. The first handles the care the parent receives and the second deals with the finances and estate. A different Attorney can be appointed for each.
What is often overlooked is that the property and financial affairs LPA can be used at any time after it has been registered – not just as a result of incapacity, be that mental or physical. For its part, the health and welfare LPA only becomes effective when the donor has lost mental capacity. Either sort of LPA only becomes legal once registered with the Office of the Public Guardian.
It appears many parents are unaware of the benefits of LPAs. Only 1 million lasting powers of attorney (LPA) were taken out in the last five years and currently only 1% of the UK population have an LPA in place at the moment. Considering 850,000 people living in the UK are currently suffering with dementia and this number is expected to rise above two million by 2051, this statistic is very concerning
But parents who have the wealth conversation and make plans accordingly can rest assured, knowing they have executors in place to handle the estate, attorneys in place should incapacity in any form arise, and their children equipped to manage the estate in the way they intended.