Loan for Top up carehome fees

[PinkDalek]

...

Changing Wills would be changing FIL Will as normal .... MIL's I have a horrid feeling that it is too late. This needs specialist advice of course. ...

If relevant, not having studies the entire thread, I understand that Statutory Wills can be made by the Court of Protection, refer to clitheroekid's earlier post on this, if appropriate under section 18 of the Mental Capacity Act 2005.

[lisyloo]

FIL takes out a loan of (finger in the air) £20,000 secured against the home to be repaid on sale of flat after second death.
Scenario 1. MIL dies first. Flat passes to FIL as normal. He eventually dies and loan is repaid to lender - whether financial institution or the son.
Scenario 2. FIL dies first. Flat passes to MIL as normal. Is either sold then (according to due process with respect to her dementia) or is kept empty till she dies, and it is then sold. Loan repaid as above. Either way it means the equity in the flat can be used to finance better care experience for MIL, which ultimately is a prime concern.

Changing Wills would be changing FIL Will as normal (i.e. could be if I outlive my wife I want x y and Z to happen. If I predecease her, i want ab and c to happen). MIL's I have a horrid feeling that it is too late. This needs specialist advice of course.

Sats

A 20K loan will reduce his entitlement to benefits and care at home. He could take a smaller amount without affecting benefits. I am not sure what due diligence the home/LA do on people being able to fund this long term, but I believe there is some (as she is not allowed to pay herself).
Scenario 1 is fine.
Scenario 2 - proceeds have to paid as per current will i.e. 50/50, there is no provision current for the loan and will cannot be changed without her consent which she cannot give.

[lisyloo]

although of course you are breaking the T&Cs of the account by revealing the PIN to a third party in the first place

Really - even to someone who had an ordinary Power of attorney at the time.
How do housebound people get money then?

[Satsuma]

Really - even to someone who had an ordinary Power of attorney at the time.
How do housebound people get money then?

I'm not saying it doesn't happen (of course it does), but everyone knows the official line is NEVER share your PIN and don't let other people use your card and PIN. You can get additional cardholders/joint accounts, but each person will have their own card and PIN for it.

There is the obvious risk that the card owner gets defrauded either by the person withdrawing with approval, or if that person gets skimmed or pickpocketed. Then there is no leg to stand on as the PIN has been revealed.
There is also the more unpleasant possibility that another person (or indeed the FIL if he began to lose faculty or even fell out with the family) connected to the family could claim the withdrawals were not authorised.

It's just a minefield and that's why the rule is so black and white.

Edit: Just found on Barclays (random). If you have authority, you can do some paperwork and then get a card and PIN of your own for that account: http://www.barclays.co.uk/power-of-attorney/ - may be worth looking into for your situation, to ensure things are kept above board.

Also HSBC have a useful table too: https://www.hsbc.co.uk/1/2/contact-and- ... rty-access

[lisyloo]

I am not sure exactly what she did but it was with Barclays so she might well have her own card.
She gets cash signed for in a journal so there is no confusion.

[Gengulphus]

ClitheroeKid - as it's a joint bank account (between MIL and FIL) can granddaughter take money out with permission of FIL?

I've only just noticed, but earlier in the thread you said "Granddaughter has access to bank account/ATM via ordinary POA and most of the bills are on DD." without saying who the ordinary POA is from. If it's from MIL, then Clitheroekid is right: it's no longer valid now that she's lost capacity. If it's from FIL, it's still fine.

Though as Satsuma has said, the bank probably has a procedure for using the ordinary POA involving the attorney getting their own card and PIN, not just using his card and PIN.

One other comment is that if possible, it would be a good idea to get a Lasting POA from FIL, to avoid the risk of going through all this again with him... Court of Protection deputyship is a way of dealing with the situation if you can't get him to agree to a Lasting POA, but the Lasting POA is generally cheaper and less cumbersome.

Gengulphus

[Gengulphus]

FIL takes out a loan of (finger in the air) £20,000 secured against the home to be repaid on sale of flat after second death.
Scenario 1. MIL dies first. Flat passes to FIL as normal. He eventually dies and loan is repaid to lender - whether financial institution or the son.
Scenario 2. FIL dies first. Flat passes to MIL as normal. Is either sold then (according to due process with respect to her dementia) or is kept empty till she dies, and it is then sold. Loan repaid as above. Either way it means the equity in the flat can be used to finance better care experience for MIL, which ultimately is a prime concern.

A 20K loan will reduce his entitlement to benefits and care at home. He could take a smaller amount without affecting benefits. I am not sure what due diligence the home/LA do on people being able to fund this long term, but I believe there is some (as she is not allowed to pay herself).
Scenario 1 is fine.
Scenario 2 - proceeds have to paid as per current will i.e. 50/50, there is no provision current for the loan and will cannot be changed without her consent which she cannot give.

Not strictly true - as PinkDalek has said, it is possible to apply to the Court of Protection to make a statutory will for someone who has lost capacity. The Court does have to be persuaded that the proposed statutory will is in their best interests, so there could be a fair amount of work and cost involved... Not something I've done though, so I've little idea just how much.

However, I don't think the proposal to take out a loan secured against the home involves changing wills. A will cannot authorise the executors to pay out to beneficiaries while leaving the estate's creditors unpaid - they've got to treat the creditors as having higher priority to be paid than the beneficiaries. The wills I've seen do actually say explicitly that creditors should be paid, via wording like "My Executors shall hold the Estate upon trust to pay, discharge or provide for my debts, funeral, testamentary and administrative expenses and to give effect to legacies" - but it's part of an executor's duties whether the will actually says so, fails to say so or even explicitly says that creditors are not to be paid (essentially, I believe it's public policy that an estate's creditors should be paid from the estate if possible, and any clause in a will that goes against public policy will be disregarded).

So what happens in scenario 2 is that the flat is sold, the loan is repaid from the proceeds and only after that's been done does the will get to say what happens to what's left.

Gengulphus

[Clitheroekid]

ClitheroeKid - as it's a joint bank account (between MIL and FIL) can granddaughter take money out with permission of FIL?

The basic answer is no - and more surprisingly neither can the FIL.

The reason is that the joint account can only operate if there is continuing agreement of both parties that both can operate the account. If one party loses mental capacity, they are by definition unable to enter into such an agreement, and any existing agreement ceases to be legally effective.

The same principle applies to third party signatories on bank accounts, such as your granddaughter. Once someone loses mental capacity they can by definition no longer agree to the terms of the third party mandate.

Of course the FIL would probably say that half the money belonged to him, but that's by no means always the case with joint accounts, and although it would be up to the individual bank how they dealt with the situation I suspect many would take the cautious approach and just freeze the account pending a Deputy being appointed.

Guidance from the British Bankers’ Association states that banks may allow existing standing orders / direct debits to continue to operate, but this would only be on the strict understanding that it was a temporary measure and that the necessary steps were being taken to appoint a Deputy.

Again, I'm well aware that many families simply don't tell the bank, so as to avoid the account being frozen. Whilst that's entirely understandable it's also illegal, not in a criminal sense but in the sense that the withdrawals are being made without lawful authority.

As is often the case, there's a big gap between a common sense solution (i.e. just keep operating the account and don't tell the bank) and the legally correct solution (appointing a Deputy). As a professional person I often have to give advice that I know is very unwelcome, and I'm sure that many people leave my office remembering the old saying "Where ignorance is bliss 'tis folly to be wise."

FIL takes out a loan of (finger in the air) £20,000 secured against the home to be repaid on sale of flat after second death.

This is a non-starter. The flat is in joint names, which means the MIL would need to be a party to any loan agreement.

MIL's I have a horrid feeling that it is too late. This needs specialist advice of course. ...

It is indeed too late for the MIL to make a new Will. Although, as has been said, it's possible for a Statutory Will to be made for her by the Court of Protection it's a complicated process and most people would feel the need to employ a solicitor. If a solicitor is involved it's likely to be quite expensive - a typical cost would be £2,000 to £3,000. In a small estate the costs may well be disproportionate.

[Gengulphus]

FIL takes out a loan of (finger in the air) £20,000 secured against the home to be repaid on sale of flat after second death.

This is a non-starter. The flat is in joint names, which means the MIL would need to be a party to any loan agreement.

Just to be clear: I take it you mean that it's a non-starter until and unless a Deputy is appointed for MIL?

Gengulphus

[Clitheroekid]

FIL takes out a loan of (finger in the air) £20,000 secured against the home to be repaid on sale of flat after second death.

This is a non-starter. The flat is in joint names, which means the MIL would need to be a party to any loan agreement.

Just to be clear: I take it you mean that it's a non-starter until and unless a Deputy is appointed for MIL?

Gengulphus

Correct.

[Gengulphus]

ClitheroeKid - as it's a joint bank account (between MIL and FIL) can granddaughter take money out with permission of FIL?

I've only just noticed, but earlier in the thread you said "Granddaughter has access to bank account/ATM via ordinary POA and most of the bills are on DD." without saying who the ordinary POA is from. If it's from MIL, then Clitheroekid is right: it's no longer valid now that she's lost capacity. If it's from FIL, it's still fine.

Just to clarify that in the light of Clitheroekid's subsequent reply: an ordinary POA from FIL is still valid. But an ordinary POA only authorises the attorney to do things the person can in principle do for themselves - it basically only gets around practical difficulties such as ones in getting to the bank. So once FIL cannot legally operate the joint account himself, his still-valid ordinary POA doesn't authorise the attorney to do so either.

Must admit I was a bit surprised by what Clitheroekid said about joint accounts not being legally operable after one of the joint accountholders has lost capacity (until an attorney with a Lasting POA or the deputy is in place). Not disputing it - it sounds entirely correct legally to me - but joint accounts are often put forward as a good thing to have in place to ensure uninterrupted access to cash if one of the joint accountholders dies. Them doing exactly the opposite (at least in principle) if one of the joint accountholders loses capacity was a bit of a surprise!

Gengulphus

[beeswax]

Can we clarify this joint account position please as we have a joint savings account with my wife with a huge chunk of our savings in it. ie it IS a savings account and not a current account although not sure if that makes any difference but the point we always thought was that in the event of one of us dying then the other one would have 'unrestricted' access to the savings account and could withdraw the lot if they wanted? It seems that IF one of had to produce a death certificate or indeed a will that could complicate matters as well?

Any guidance by CK is appreciated.

[Clitheroekid]

Can we clarify this joint account position please as we have a joint savings account with my wife with a huge chunk of our savings in it. ie it IS a savings account and not a current account although not sure if that makes any difference but the point we always thought was that in the event of one of us dying then the other one would have 'unrestricted' access to the savings account and could withdraw the lot if they wanted? It seems that IF one of had to produce a death certificate or indeed a will that could complicate matters as well?

Any guidance by CK is appreciated.

The situation you describe is a common one, and in most cases it does make good sense to have a joint account, as if one of the account holders dies the other one automatically becomes the sole owner as far as the bank is concerned.

This means that all the survivor needs to do to continue operating the account is produce the death certificate to the bank. It avoids the delay and expense of obtaining probate, and is therefore A Good Thing.

This principle applies to all jointly owned investments, not just bank accounts. So, for example, shares or unit trusts that are owned in joint names will be transferred to the survivor on production of the death certificate.

But it's a totally different situation where the joint account holder loses mental capacity. Because they are incapable of consenting to any money being withdrawn it means they have effectively withdrawn consent to the account being operated jointly.

It's similar to the situation where a husband and wife owning a joint account split up. If either of them withdraws their consent to the arrangement the bank effectively has to freeze the account, otherwise they could be sued by the person who had withdrawn their consent.

Incidentally, I say `as far as the bank is concerned' because although the bank will assume the survivor is entitled to the money in the account it ain't necessarily so.

If, for example, Great Aunt Mabel is incapacitated she may put her noxious nephew Norman on the account as a joint holder simply to allow him to go to the bank and withdraw money. However, legally the money belongs entirely to her.

The difficulty arises when she drops off her perch, having left her entire estate to her noble niece Nigella. The money in the account should go to Nigella, but because the account was in joint names Norman can simply go to the bank armed with the death certificate, have the account transferred into his name and scarper with the proceeds.

[Satsuma]

Just want to say thanks to CK for an illuminating facet of joint personal banking that I am sure many of us had no real understanding or awareness of.

The detailed explanations are both interesting and informative!

Sats

[melonfool]

"It's similar to the situation where a husband and wife owning a joint account split up. If either of them withdraws their consent to the arrangement the bank effectively has to freeze the account, otherwise they could be sued by the person who had withdrawn their consent."

I am SO looking forward to doing this to the idiot ex who is delaying my house purchase by fannying around. As soon as it's through I'm withdrawing half the residual cash in the joint account (as is agreed with him) and then writing to S'der to remove my authority for the account to be operated. That'll give him a nice admin headache to deal with and hopefully make him wonder why he wasn't more cooperative at sorting things out earlier (November we split up, still not been able to move!).

Mel

[Mike88]

It sounds easy to remove one name from a joint bank account but it's not. It's taken my son 3 months to remove his name from his current account as both parties have to agree to the transaction and if one of the names is not motivated to cooperate the process simply cannot happen. Freezing accounts is not that easy either especially if there is an agreed overdraft facility. My son tried to freeze another joint account; the Bank told him to make an appointment and in the time that took to arrange a meeting his soon to be ex wife ran the account down from being £5k in credit to over £2k overdrawn.

How this translates into an account where one of the parties ceases to have mental capacity is anyone's guess but the process might not be as simple as it sounds. Despite the position outlined by CK I wouldn't mind betting that the vast majority of joint signatories would carrying on operating the account irrespective of the mental capacity of one of the parties.

[Lootman]

Must admit I was a bit surprised by what Clitheroekid said about joint accounts not being legally operable after one of the joint accountholders has lost capacity (until an attorney with a Lasting POA or the deputy is in place). Not disputing it - it sounds entirely correct legally to me - but joint accounts are often put forward as a good thing to have in place to ensure uninterrupted access to cash if one of the joint accountholders dies. Them doing exactly the opposite (at least in principle) if one of the joint accountholders loses capacity was a bit of a surprise!

There is certainly what I would claim to be an inconsistency in the way the law is written. In theory the whole point of a joint account is to allow one of the joint tenants unencumbered access to an asset in the event that the other tenant is indisposed. But as written it is better for that other party to conveniently drop dead rather than merely be incapacitated.

Of course, as CK hints (but is much too professional and circumspect to actually formally endorse) the solution is glaringly obvious. Move the money elsewhere and only then tell the bank of the incapacity. Technically wrong but, when done honestly and in good faith, still a better outcome for those most affected. As such, it is rather akin to somebody with a POA moving the soon-to-be-deceased's assets while they are in their final hours, or delaying notification of death until the account is cleaned out.

I also wonder, but then often do, why lawmakers pass laws that by their very nature induce and motivate people to behave in such a contrived and arbitrary manner to skirt those same laws. That other law - of unintended consequences - springs to mind. If called to account for such an act, I might be very tempted to ask why the law was written to so reward such behaviour.

[Mike88]

Must admit I was a bit surprised by what Clitheroekid said about joint accounts not being legally operable after one of the joint accountholders has lost capacity (until an attorney with a Lasting POA or the deputy is in place). Not disputing it - it sounds entirely correct legally to me - but joint accounts are often put forward as a good thing to have in place to ensure uninterrupted access to cash if one of the joint accountholders dies. Them doing exactly the opposite (at least in principle) if one of the joint accountholders loses capacity was a bit of a surprise!

There is certainly what I would claim to be an inconsistency in the way the law is written. In theory the whole point of a joint account is to allow one of the joint tenants unencumbered access to an asset in the event that the other tenant is indisposed. But as written it is better for that other party to conveniently drop dead rather than merely be incapacitated.

Of course, as CK hints (but is much too professional and circumspect to actually formally endorse) the solution is glaringly obvious. Move the money elsewhere and only then tell the bank of the incapacity. Technically wrong but, when done honestly and in good faith, still a better outcome for those most affected. As such, it is rather akin to somebody with a POA moving the soon-to-be-deceased's assets while they are in their final hours, or delaying notification of death until the account is cleaned out.

I also wonder, but then often do, why lawmakers pass laws that by their very nature induce and motivate people to behave in such a contrived and arbitrary manner to skirt those same laws. That other law - of unintended consequences - springs to mind. If called to account for such an act, I might be very tempted to ask why the law was written to so reward such behaviour.

If the mentally capable joint account holder asks the bank to remove one of the names the person to be removed has to give consent but if he/she is mentally incapable of signing the documentation (and the holder of the power of attorney is unable to do so) how will that be possible? The law/bank rules and practicalities seem to be far apart.

[Gengulphus]

If the mentally capable joint account holder asks the bank to remove one of the names the person to be removed has to give consent but if he/she is mentally incapable of signing the documentation (and the holder of the power of attorney is unable to do so) how will that be possible? The law/bank rules and practicalities seem to be far apart.

Three cases:

* If there is no POA in place, it will be possible by getting the Court of Protection to appoint a deputy for the person who has lost capacity - a deputy being a similar role to an attorney, but not actually appointed by the person concerned and so subject to somewhat stronger safeguards. The deputy can then give consent for the person who has lost capacity.

* If there is an ordinary POA in place, it has ceased to be valid and so the attorney is not merely unable to give consent for the person who has lost capacity, but no longer an attorney at all. So the solution is the same as in the first case - get the Court of Protection to appoint a deputy.

* If there is a Lasting POA in place, it is still valid, so the question is why the attorney is unable to give consent. If it's a temporary reason (and not too long-lasting), the answer is just to wait until they can. If it's a permanent or long-lasting reason, they either have good reason (i.e. that it's not in the best interests of the person who has lost capacity), in which case consent shouldn't be given, or they're no longer capable of acting as attorney, e.g. through having lost mental capacity themselves. The solution is then to get the Court of Protection to remove the attorney and appoint a deputy.

So the issue isn't whether it's possible - it is, as long as what needs doing is in the best interests of the person who has lost capacity. The issue is instead that it's rather cumbersome and expensive. But I'm afraid that's part of the inevitable cost of safeguarding them: all the solutions involving not telling the bank, etc, work much more smoothly, provided there isn't a 'noxious nephew Norman' exploiting them...

Gengulphus

[lisyloo2]

MIL would never agree to lasting POA. (Personally I did EPA when it was free). We are trying to set it up for FIL but having difficulty finding the relevant certificate holders (I think that's what they are called). These are meant to be people who know and would stand up for FIL but cant be family. As MIL and FIL have been housebound and have outlived many of their friends, we are struggling to find anyone at all who fulfills the brief properly.