Ordinary powers of attorney

An ordinary power of attorney or general power of attorney is a basic document that gives the attorney the power to deal with the donor’s financial affairs. It can be as wide reaching or as limited as the donor wishes. An attorney cannot generally exercise any of the functions they have as a trustee or personal representative but such authority can be delegated specifically by way of a trustee power of attorney under section 25 of the Trustee Act 1925 (TA 1925). An ordinary power of attorney will be revoked automatically by the mental incapacity of the donor.

Ordinary powers of attorney are governed by the Powers of Attorney Act 1971 (PAA 1971) as to, for instance, their execution and revocation. However, in respect of some matters, such as capacity, the rules relating to the creation of a power of attorney can still be found in common law.

Creation of the power

In order to create a valid ordinary power of attorney, the donor must be capable of understanding the nature and effect of the power. The power of attorney must be executed

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All in? Court confirms when a settlement is 'made' for the purposes of excluded property (Accuro Trust (Switzerland) SA v The Commissioners for HMRC)

Private Client analysis: This case considered the meaning of 'relevant property' under the settlements regime of the Inheritance Tax Act 1984 (IHTA 1984) and, in particular, the time at which this definition is to be tested. The question arose as to whether the trustees of an offshore trust established by a non-UK domiciled settlor were subject to the UK settlements regime in respect of property added to the trust after the settlor became deemed domiciled in the UK, or whether they were exempt from such charges as the trust consisted solely of excluded property. The First-tier Tribunal (FTT) held that whether trust property is excluded property is based on the status of the trust at the time that it was established, not at the time that the property in question was added to the settlement. As a result, the trust in this case did consist solely of excluded property and no inheritance tax (IHT) charges arose as a result of either the ten-year anniversary or capital distributions. The FTT was also asked to consider whether their jurisdiction was appellate, or supervisory only. The FTT held that, while their jurisdiction was supervisory, the questions raised by the trustees were relevant in establishing whether HMRC had acted reasonably and that the outcome (ie that the paid IHT should be refunded and that no further IHT was due) would be the same in either case. Written by Katherine Willmott, senior associate solicitor at Foot Anstey LLP.

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