How would your family access your wealth in an emergency?

During the Covid-19 crisis, you may have taken the extra time with your family to talk about contingency plans for your wealth. A contingency plan can give you and your family peace of mind – even if an emergency seems highly unlikely.

These are a few of the questions you might ask yourself when you think about putting a plan in place:

  • Does my family have access to enough cash if something happens to me?
  • Where is the cash held and is it safe?
  • Whose name is the cash in?
  • Does my family know who to call to access the cash?
  • Have I thought about and discussed my broader succession plan with my family?

Covid-19 has prompted a dramatic increase in will and probate enquiries. The legal profession has had to turn to case law from 1781 (Casson v Dade, among others) to decide whether witnessing a will through a “carriage window” can be relied upon in the age of Zoom.

As the first and most immediate part of your contingency planning, you should consider how you’ll give your loved ones access to your funds if you become incapacitated.

There are a range of options available in relation to your bank accounts, each with their own pros and cons. Depending on your personal circumstances, some of these options may have potential tax implications for your family. The J.P. Morgan Wealth Advisory team can talk you through your choices, as well as your wider succession plan. You should always consult your independent tax and legal advisors to ensure you are taking the right steps.

A family member holds cash in their account

You might consider making a cash gift to a family member so they can hold it in their name. This will give them complete control and access to the funds, allowing them to do whatever they want. Remember that there may be inheritance tax implications of making such a gift, which you’ll need to consider. In addition, you might not be comfortable with another family member having free access to this money.

Hold cash in a joint account

You can set up a joint account to either allow the other account holder to independently issue instructions over that account without your signature, or for instructions to only be accepted with both account holders’ signatures. In this instance, the second option might not make much sense if the purpose of the account is an emergency fund.

Holding cash or investments in a joint account will, in most circumstances, mean both account holders need to report to HMRC their share of any income of capital gains that arise on the account and to pay the appropriate amount of tax (presuming the account is owned 50/50).

As with a separate account held in another family member’s name, each account holder will have complete control over and access to the funds. As with a cash gift, there may be inheritance tax implications of opening a joint account with a relative.

Survivorship rules will apply to this account if one of the account holders dies. The survivor becomes the sole account holder and keeps complete control and access without the need for a death certificate or probate.

Account in your name but with General Power of Attorney (GPOA)

The account remains legally in your name, but the GPOA holder has powers to issue instructions over the account at any time and the bank will act on their instructions. The GPOA holder can also act if you’re incapacitated, but their authority over the account would be revoked if you die.

Account in your name but with Limited Power of Attorney (LPOA)

The account remains legally in your name, but the LPOA holder can execute most transactions on the account apart from taking money out of the account. As their authority would be revoked if you die, this may not be the most useful option in emergencies.

Account in your name

You have complete control over and access to your account to the exclusion of other members of your family. Access to this account will be frozen if you die and will form part of the probate relating to your estate (which can take some time).

A Lasting Power of Attorney  

This is a separate legal document executed and registered with the Court of Protection. A Lasting Power of Attorney can be for property and financial affairs or health and welfare. The main benefit of this route is that the powers it grants are limited to when you’re incapacitated. It is preferable and relatively straightforward to complete the registration of a Lasting Power of Attorney at the time of execution so that it can be used as and when required. Be aware that during this period of social distancing it may be challenging to complete the formalities needed to execute a Lasting Power of Attorney.

What other people are doing

The most common ‘emergency pot’ we see our clients use is a combination of funds held in the name of their spouse or partner and jointly held accounts, each holding sufficient liquidity to meet the family’s financial obligations during a crisis.

If the worst happens, probate over complex estates can take a number of months – if not years – so you’ll need to bear this in mind.

Some clients have reservations about GPOA and LPOA given the broad range of powers they provide and the fact that they are revoked on death.

An up-to-date will and succession plan

This is something we recommend you check every three to five years to ensure your wishes are reflected accurately. The Wealth Advisory team work with our clients and their tax and legal advisors to help them put their affairs in order and support them as they communicate and agree their plan with their family.

If you have any questions or would like to discuss your contingency plans, please do not hesitate to contact your J.P. Morgan representative who can organise a conversation with a member of the Wealth Advisory team.