Is Power of Attorney strong enough?

About five years ago, my father sold his house and lent the proceeds interest- free to my nephew (his grandson) to help purchase a hotel. This was on the understanding that my father would live in a flat in the hotel, and that if he needed to go into care the hotel could be sold and the loan repaid to his estate. Now, aged over 90, my father is no longer able to look after himself and has come to live with me. I have power of attorney for his affairs. He has asked me to pick up some of his personal possessions from the flat. However, my nephew is refusing to hand over anything. What rights do my father and I have?

Helena Luckhurst, a private client solicitor at Speechly Bircham, says you should identify what kind of power of attorney (PoA) your father made. Was it an ordinary power of attorney, an enduring power of attorney (EPA) or a lasting power of attorney (LPA)?

You also need to establish whether your father is capable of managing his assets and finances.

From a legal standpoint, a person lacks capacity if he or she is unable to make a decision because of an impairment of, or a disturbance in the functioning of the brain.

If your father made an ordinary PoA and he is mentally incapable, you can no longer use the power. You should instead apply to the Court of Protection to be appointed as your father’s deputy so that you can deal with his assets.

If your father made an EPA and if he has become mentally incapable, you cannot act as attorney until you take steps to register the EPA.

This takes a few months, during which time your powers are limited but do cover taking steps to prevent loss to your father’s estate.

If your father made a LPA, you cannot act as attorney until the LPA has been registered, regardless of whether your father has capacity or not.

Check that the PoA does not contain any restriction preventing you from dealing with your father’s possessions and, if it is an EPA or LPA, a restriction preventing you from acting until your father is mentally incapable.

Assuming no such restrictions, you should, as his attorney, take charge of your father’s possessions and insure them.

However, the question of what rights your father has to retrieve his possessions is complicated.

The terms under which he occupied the flat will affect his rights. There may be relevant terms in the loan document, if there
is one.

It may be that your nephew is holding the possessions as a trustee – thereby legally requiring him to hold them for your father’s benefit. But you can, as attorney, instruct a lawyer on behalf of your father to assist with recovery.

Can I have a CGT holiday?

My wife and I bought a holiday home in France in 1988 and moved in two years later. The property is in my wife’s name. Can she transfer or gift it to me, so that I can offset the gain against my UK capital gains tax (CGT) losses?

Christopher Groves of solicitors Withers says you will need to consider the potential tax consequences of your actions in both countries.

Assuming you are UK- domiciled, you will be subject to UK capital gains tax (CGT) and inheritance tax (IHT) on your worldwide assets.

However, spouses (or civil partners) who are living together can freely transfer assets between themselves on a “no-gain/no-loss” basis. So if your wife transfers her interest in the property to you, she will not be subject to UK tax on the transfer and you will be treated as having her base acquisition cost for calculating the charge to UK CGT when you sell.

For IHT purposes, the transfer of the property to you will also be exempt.

The French tax position is more complex. French versions of UK taxes – the imposition sur les plus values (capital gains tax) and droits de mutation (gift tax) – will apply.

There is no specific CGT exemption for the transfer of property between spouses – but because your wife has owned the property for more than 15 years, she will not be subject to French CGT on the transfer.

You will be deemed to acquire the property with a base cost of the value at the time of the transfer – rather than the original purchase price – and pay French CGT on
a future sale by reference to that new value.

The transfer of the property will also be subject to gift tax in France – again, there is no exemption for transfers between spouses. The amount of this gift tax will depend on the donor’s age and the value of the property. To make the transfer will require instructing a notary, whose fees can be significant.

On a subsequent sale, you will be able to offset your existing UK capital gains tax losses against the property’s gain – which is treated as arising in the UK (from 1988).

In France, you will pay CGT on the gain arising since the transfer of the property to you. You will be able to offset the tax that you pay in France against your UK liability.

You will need to decide if the benefit of being able to use your UK losses will more than offset the cost of transferring the property.