Loss of Capacity and Joint Ownership
In circumstances where a loved one has lost capacity, charities, the Office of the Public Guardian and even Google can provide much-needed advice and guidance. In some circumstances, however, things can be more complicated, particularly if the person who has lost capacity is acting as a trustee.
This is more common than might be imagined: people do not only act in this capacity for trusts created deliberately by wills or by lifetime financial planning, but also where a trust is established by law, such as in the joint ownership of property. Where one of the joint owners has lost capacity, selling or purchasing a property can become even more taxing than usual.
Example
Take the case of husband and wife Fred and Florence, for example. Florence has lost mental capacity, and neither Florence nor Fred have any enduring or lasting powers of attorney in place. The couple’s home is owned as joint tenants, and Fred now wishes to sell this property in order to move to one more suitable for assisting and aiding Florence. Fred and Florence have two children.
Since joint owners of a property are also trustees of the property by statute, Fred will need to make an application to the Court of Protection for leave to appoint a new trustee to act on Florence’s behalf throughout these proceedings. He will also have to make a separate application to be appointed as Florence’s deputy, within which he will have to ask for further permission to use Florence’s half of the sale proceeds for the purposes of purchasing a new property.
This is an extra hurdle to clear at what is already a stressful time, but unfortunately there is also a further complication. In order to sell the property, sale documents will need to be signed by both Fred and Florence. However, Florence no longer has the capacity to do this herself, and Fred cannot sign on both his own behalf and Florence’s. Given the circumstances, Fred and Florence’s children should apply to be appointed as deputies in addition to Fred, since this will allow them to sign the sale paperwork on behalf of their mother.
Trust and Powers of Attorney
As this example suggests, difficulties can arise where assets need to be transferred out of the name of a trustee who has lost capacity, and this includes the sale of jointly owned property.
While an attorney cannot always act in the capacity of a trustee on a donor’s behalf, the Trustee Delegation Act 1999 explicitly gives attorneys the power to act on behalf of a donor regarding their jointly owned property. If Florence had drafted lasting powers of attorney appointing her children as attorneys before she had lost capacity, then these court applications would not have been required. It is of course vital, however, that the correct attorneys are appointed by these documents, so seeking professional advice is recommended.
The route to an outcome that is satisfactory for all parties is often complicated and time consuming where the interactions between trusts and capacity are an issue. For this commonly occurring, but little known, form of trust ownership, proper planning is essential. Should you wish to speak with a professional about how we can help, please contact us:
email: cm@sterlingnorth.co.uk or phone: 01494 614 636 or 08082 819305
