Looking after Auntie

8th January 2016

We do a lot of work for lawyers acting as Attorney or Deputy to the old and infirm. Just as I was thinking about the concerns and issues they have, I found myself in a similar situation when my Aunt was discovered wandering around Tesco in her home town and was taken into hospital ‘lost and disoriented’.

Many years ago I had been appointed, along with my father and mother, as Attorney for my Aunt. As my father has since died it is has fallen upon me (mother is 82) to sort out Auntie’s financial arrangements. We live many miles away so we relied upon my Aunt’s local Social Services to reach the decision that she could not go home and to find her a Care Home where she could be properly looked after.Nurse Discussing Medical Notes With Senior Woman At Home

The financial assessment meant that she needed to fund herself in the new home. As I had the necessary financial powers I was able to sort out her assets and sell her house. It was my responsibility to structure her assets in a way which would fund her in the Care Home where she seemed comfortable for as long as possible. I would be very unhappy if I was forced to move her to a cheaper home.

Her income (including Attendance Allowance) was not enough to cover her weekly care costs. This is common as a full time care home can cost between £2,500 and £6,000 per month depending on its location and level of care.

I calculated the shortfall between her income and her care costs and put aside sufficient cash from the sale of her house to cover 5 year’s needs. It was important to retain this sum as cash because the value of investments can fall as well as rise and therefore the minimum timescale for any investment should be 5 years. To maximise the interest she could get and cover the annual expenditure the cash was arranged in a portfolio of fixed interest accounts designed to pay a lump sum of cash each year as they matured.

The balance of the proceeds from the sale of the house was invested.

The investment strategy gave me some pause for thought – should I invest as she would have (and I did have some evidence as to how she structured previous investments) or with her potential beneficiaries in mind? There is an argument that one could invest aiming for the maximum possible return because, if the investments were to fall in value resulting in her funds being exhausted, the local authority would pay for care. I decided against this as, with my Aunt’s best interests at heart, I did not want to risk her being moved from a home she seemed to like.

In this case it seems that my Aunt will have enough money for her needs, but not so much that Inheritance Tax will be due on her death. In cases where Inheritance Tax is an issue an Attorney must remember they have no power to make gifts so there are only a limited range of options available.

My recommendation is always, take professional advice when managing capital as an Attorney; you are acting on behalf of someone else, you have a duty of care to be diligent and act in their best interests.