Saturday, 24 February 2024

My parents are spending my inheritance – what can I do about it?

My parents are spending my inheritance – what can I do about it?
Monday, 13 November 2023 08:59

Discussing inheritance with parents can be daunting, as even the most diplomatic approach can turn contentious. Nevertheless, future planning is crucial to maximize the well-being of the younger generation and minimize inheritance tax bills.

In the UK, adult children do not automatically have rights to their parents' money. However, most parents want to preserve their capital for their children and grandchildren while ensuring they have enough to enjoy retirement. This becomes especially important when second marriages and stepfamilies complicate matters, or when adult children may need power of attorney from their elderly parents.

Telegraph Money explores the best ways to manage multi-generational finances, allowing parents to enjoy cruises and well-deserved luxuries in retirement.

How to talk to family members about money Involving the entire family in planning can help reduce the likelihood of future disputes and manage expectations, says Sean McCann, a certified financial planner at NFU Mutual. "Plan as early as possible because the earlier you plan, the more options you have, especially when it comes to mitigating any inheritance tax bill," he advises.

"Engaging a lawyer or financial consultant experienced in family planning can open up options that may not have been considered. It can also help take some emotions out of the discussions if someone from outside the family is involved."

Being fair to all children doesn't necessarily mean promising equal shares of wealth, as Helena Morrissey, City "superwoman" with nine children, pointed out. "There is no simple formula; there are just a few pieces of advice that can help achieve the best results – and, importantly, prevent disputes or resentments among family members," she wrote for Telegraph Money.

McCann suggests that parents may want to reflect any financial assistance they provided to specific children throughout their lives or consider factors like one child investing more time and energy into the family business.

Setting up power of attorney A lasting power of attorney (LPA) is a legal document that allows one or more individuals, known as "attorneys," to make decisions or act on behalf of a person who cannot make decisions for themselves (the "donor"). There are two types of LPAs: one related to health and welfare, the other to property and financial affairs. At the time of appointing an attorney, the donor must be over 18 years old and have mental capacity.

Louisa Lewis from the legal firm Freeths suggests that families should consider setting up power of attorney anytime after the age of 18. "We recommend people do this as part of their overall estate planning, for example, concurrently with executing their will," she says.

How to protect family money when a parent refuses to see a doctor? According to Lewis, this is a "complex" situation. "Even though people have capacity, they can make unwise decisions. This is enshrined in the Mental Capacity Act 2005," she says.

"If adult children are concerned about their parents, they should seek advice from social services, who, under the Care Act 2014, have legal responsibility for anyone with relevant needs."

If necessary, social services can direct someone to treatment within the National Health Service and involve doctors. In certain circumstances, they can compel someone to undergo treatment. Lewis suggests contacting a doctor sooner rather than later, given the usually heavy workload of social services.

When can power of attorney be abused, and how do lawyers protect against it? For professionals making decisions in the best interests of potentially vulnerable clients, the Mental Capacity Act 2005 offers legal guidance. Lawyers can use vulnerable client policies to support individuals. For example, a client with cognitive impairments may require recorded conversations, longer meetings, and the use of notes to verify any proposals made.

Can a donor prohibit an attorney from making decisions under power of attorney? This happens "often," says Lewis. "The potential depends on the specific decision, so someone may have the ability to make certain decisions but not others," she says. In this situation, legal assistance may be sought.

Managing money with second families and remarriage Lawyers and financial planning experts cannot guarantee that adult children will inherit their parents' money since adult children do not have automatic inheritance rights in the UK, unlike in France.

If a parent enters a second marriage and bequeaths their estate to additional children, it may be challenging for an adult child to contest this legally. However, situations arise where adult children were informally promised money. In such cases, they may bring a claim against their parents' estate.

News

Proceso Alcala: Key Figure in...
Friday, 23 February 2024

Opinion

Tags