Are you considering or have you recently been appointed as a financial guardian? Do you know what is expected of you in this role?
The role of a financial guardian is an onerous task with an expectation to fulfil administrative responsibilities such as completing an inventory of the adult’s estate, preparing a management plan and submitting annual accounts.
A guardian must always consider the principles set out in the Adults with Incapacity (Scotland) Act 2000 before making any decision or carrying out any action.
- The decision must be of benefit to the adult concerned;
- The action by the guardian will only be taken when it is really needed;
- The decision must take into account the wishes of the adult;
- The action or decision should restrict that person’s freedom as little as possible; and
- Where possible the adult should be encouraged to exercise whatever skill they have concerning their property and financial affairs.
As well as the above, it is important to know the key duties that financial guardians are expected to fulfil:
- Keeping inventory and management plans as ‘live’ documents
The inventory of estate provides an overview of the income, assets, expenditure and debts of the adult. The management plan explains how the financial guardian intends to manage the adult’s estate. Both the inventory and the management plan are required by the Office of the Public Guardian (“OPG”) no later than 3 months from the date the appointment was registered. These documents should be reviewed annually and updated where there have been changes in the adult’s circumstances.
- ‘Time and trouble’ award for busy guardians
Remuneration is a payment made to financial guardians from the adult’s estate to compensate for acting as guardian. This is calculated by the OPG when they approve an account. Such remuneration is also available to professionals in their appointment as financial guardian. The remuneration following the first set out accounts is higher than the following years due to the work involved in establishing what makes up the adult’s estate and what is to be done with it.
In exceptional circumstances, where a professional guardian has been appointed, the OPG may authorise, in any accounting period, part or all of the fee paid on a time and trouble basis at a maximum rate of £160 per hour. The financial guardian will be required to submit a comprehensive time and trouble statement from which the OPG can assess matters.
- Reasonable costs where a guardian delegates tasks to a professional
Where specialist advice or services are required, the financial guardian may delegate their powers to professionals. The cost of specialist advisers or services may then be charged against the adult’s estate. Nevertheless, care should be taken to appoint reputable professionals.
- Guardians ability to gift on behalf of the adult
A financial guardian may make gifts from the adult’s estate but will require authorisation from the OPG if any gift exceeds £50 or a recurring gift is more than £500. Recurring gifts e.g. birthday presents to relatives, may be included in the management plan and, if approved, no further application will be necessary. It should always be remembered that gifts out of the adult’s estate may be deemed a deliberate deprivation of assets when the estate is assessed by the Local Authority for care charges. The intention to make gifts to deliberately reduce the adult’s capital is not acceptable. A prior agreement between a grandmother and a grandchild for the purchase of a car, for example, may be acceptable if this can be evidenced to the satisfaction of the OPG or where another grandchild received such treatment. There may be cause for concern if the grandmother agreed to purchase cars for each of her 10 grandchildren – this will be open for debate and the guardian should tread carefully.
- When should the guardian engage in IHT planning
If the adult’s estate is such that an IHT liability on their death is likely then the guardian should consider engaging in IHT planning, particularly if this was something the adult was in the habit of doing before they became incapable. The financial guardian if not already one themselves, should seek professional advice from a solicitor and financial advisor.
- Record keeping
The financial guardian should retain receipts where expenditure out of the adult’s estate is more than £100 at any one time. It is not necessary to produce a receipt where the adult is living with a family and the weekly shop comes to more than £100 but the adults respective cost is a fraction of that. Establishing a record keeping system that is effective for the financial guardian is important – keeping the receipts in chronological order will make the accounting process easier come year end.
- Monitoring entitlement to benefits
While it is important to regularly check what outgoings the adult has or is likely to have, for example bills for utilities, council tax, and what arrangements are in place to pay these, it is also important that the financial guardian reviews, regularly what income the adult is receiving, what are the payment arrangements, and whether the adult is receiving all the benefits and other sources of income to which he or she may be entitled to.
This is an overview of some of the duties of a financial guardian and all may not be required, depending on the complexity or simplicity, of an adult’s affairs.
A financial guardian owes a duty of care to the adult whose affairs they are managing. Where a guardian abuses their powers, it is possible that their actions may be reported to the police or, if a professional person, to their supervisory body (or both if appropriate). A professional person acting under a guardianship order must demonstrate the skill and care that would be expected of a reasonably competent member of that profession.
It should be remembered that, in most cases, the appointment of a financial guardian can be avoided where the adult has put in place a continuing Power of Attorney before they became incapable.
Corah Franco, Solicitor
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