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Joshua
Joshua, Lawyer
Category: Family Law
Satisfied Customers: 26069
Experience:  LL.B (Hons), Higher Prof. Dip. Law & Practice
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I and my sisters have POA over our mothers affairs. She has

Resolved Question:

I and my sisters have POA over our mothers affairs. She has a Friends Provident with profit bond that she wishes to put into trust for her 8 grandchildren to avoid probate issues, IHT is not an issue as her property 250000 and assets are below the NRB.
The Bond was purchased 17 years ago for 50000. Today's cash in value is c88800. In previous years she has taken a total of 8000 out of the policy. Our mother has no need of the money now and she wants it to go to her grandchildren equally. There are no other features to the to the policy that my mother could benefit from.
My question is which trust is most suitable?
Submitted: 1 month ago.
Category: Family Law
Expert:  Joshua replied 1 month ago.

Hello and thank you for your question. I will be very pleased to assist you. I'm a practising lawyer in England with over 10 years experience.

I am sorry you have been waiting over the weekend for a reply. May I clarify that your mother still has capacity and has made the above decision herself?

Customer: replied 1 month ago.
she has capacity the POA set up as she is getting forgetful and didn't want to leave it too late. It now looks like the trust issue is a no go as she has previously highlighted the Bond proceeds to go to her grandchildren on her death but now feels it best the grandchildren get the proceeds while she is alive and she can see them enjoy her gift. With this in mind I understand that her gifts will count as PET's and that the full surrender value will be divided by the 17 years the Bond has been in place and this will be added to her income to calculate any HRT due. Is this correct? FYI her total income is around £20000 pa
Regards
***** *****
Expert:  Joshua replied 1 month ago.

Many thanks for the above. One final question if I may - does she wish to give the funds to the grandchildren now or does she wish to leave the funds in trust for them when they reach a certain age (they may already all be adults of course in which case this question may not be relevant)?

Customer: replied 1 month ago.
The age range of the 8 grandchildren is 28 to 42. My mother wants to gift the monies now mainly because the grandchildren are starting families, buying homes or building businesses and they could do with a cash input now.
Expert:  Joshua replied 1 month ago.

Thank you. Your mother is perfectly entitled to make the above gifts if she wants to. As her power of attorney you do not have any power to make gifts on her behalf unless your mother has given you an express power to do so in the power of attorney document. Otherwise the limits of our powers as attorney are to give small customary gifts such as birthday presents and the like on your mothers behalf which should would customarily give herself.

So it is important that your mother makes the gifts herself rather than you do it for her as her attorney. Of course you can help her but you should ensure there is a documented paper trail that shows that your mother made the gifts and not you. e.g. she signs a cheque and closure forms for the bonds and so on not you. To do otherwsise could leave the transaction open to a dispute by a third party in the future if your mother were for example to lose capacity. Providing it is your mother rather than you that makes the gifts this presents no problem.

Does the above answer all your questions? If it does, I should be very grateful if you would kindly take a moment to click a rating for my service to you today. Your feedback is important to me. If there is anything else I can help with please reply back to me though

Customer: replied 1 month ago.
Thank you but just to clarify are my assumptions above correct ref the gifts becoming PET,s and the tax treatment on surrender of the Bond.
Expert:  Joshua replied 1 month ago.

The gifts will be PETs as you suggest so the money will be treated as being in her estate for up to 7 years after the date she makes the gifts for tax purposes though there is taper relief which applies in the last 5 years of this period of 20% a year up to 100% relief after the 7 years.

The bond will be liable for income tax for interest. There is usually no captal gains tax to pay on a bond unless it is an index linked bond. The provider can confirm the position if you are not certain as to whether it is an index linked bond or not and whether CGT may be payable.

Has the above answered your questions satisfactorily?

Joshua and other Family Law Specialists are ready to help you
Customer: replied 1 month ago.
thank you.
Expert:  Joshua replied 1 month ago.

Many thanks