Managing savings as an Attorney or Deputy

Becoming an attorney/deputy for a loved one can bring with it countless responsibilities and worries.  Managing financial affairs is just one of them, however it can be a significant burden on an attorney’s time.  Although investments can be managed by a financial adviser, cash savings regularly become the responsibility of the attorney directly.

Getting started managing attorney cash can be overwhelming, however the reward available can be much greater than that available with the high street banks.

Case Study

When attorney cash savings are properly managed, the return achieved can help towards care costs and bills.

Mrs Smith, a retired schoolteacher, has recently been admitted to a care home and her house has been sold by her attorneys, who are family members.  Her attorneys don’t want the sale proceeds to be eroded by fees and would like to look at solutions.

Her care home fees are charged at £600 per week, equating to £31,200 pa.

Her current income profile is as follows:

• Teachers retirement pension:  £18,000
• State Pension:  £8,035
• ISA income:  £4,000

Mrs Smith’s retirement pension and state pension (after tax) equates to £23,200 plus her investment income (tax-free) of £4,000 giving her a net total of £27,200 pa (£523 per week).

She, therefore, has a shortfall of £77 per week for covering her care home fees.

Her property sold for £400,000 and her attorneys have determined that if the client remains with her current high-street bank, that would provide annual net interest of £1,800 pa, based on funds being held on a rolling one-year term of 0.50%, leaving a shortfall of £2,200 per annum.

If her attorneys were to use DCM for the £400,000, the client could potentially achieve a net return of £4,280* based on the same access period assuming an interest rate of 1.65%.  An increase of over £2,400 pa compared with her current bank.

Using DCM over her high-street bank could help address three issues;

1. Her current shortfall is adequately covered by £105 per week, which could also cater for any future increases in fees or other care costs
2. Her investments do not need to be liquidated at this point
3. The value realised from the house sale has not been eroded

*net of basic rate tax and DCM fee

Getting started

Before you start researching accounts that can accommodate attorney/deputy cash, there are some important points to consider:

How many attorneys/deputies are needed to open and manage an account? 

This will depend on the set up stated on the Power of Attorney (POA) document.  If each attorney can act separately, they have the choice to have one or more attorneys open and manage the accounts.  This is usually shown on the POA document as ‘jointly and severally’.  If attorneys are required to act together, then all attorneys must be named on the application for a new account.  This is usually shown on the POA document as ‘Jointly’.

When will cash be required?

Before you search for accounts, it’s important to be clear when access to the cash will be needed.  For example, if the cash is being used to meet care costs etc, it may not make sense to place all the cash in a 2-year fixed term deposit account.  Fixed term accounts don’t usually allow early access and funds will only be available for withdrawal on maturity.  There are some exceptions to this, however most providers consider this to be only in the event of the death of the beneficial owner.

Should you be concerned with FSCS protection?

It is important to consider which providers are suitable.  The rate available is just one element of choosing the right accounts.  Check whether the provider is covered under the Financial Services Compensation Scheme (FSCS).  If the provider ceased trading would you get the savings back?  Also, consider how much you will deposit in each account.  FSCS cover has a limit.  If you are depositing more than £85,000 per provider, a proportion of funds may not be covered.  Spreading funds across different providers will help to reduce this risk, however some providers are linked and only offer one lot of FSCS cover across their group of brands.  It is not always obvious which provider belongs to which group.

Pitfalls

Here are some of the obstacles when managing attorney cash:

• Finding available accounts can be time-consuming.  Not all providers offer accounts for attorney cash and those who do don’t always offer competitive rates.
• If attorneys are required to act together (cannot act separately), this is likely to mean fewer available account options – this is mainly because providers don’t have the system capabilities to make this work in practice.  Providers find it much easier to deal with requests when any one of the listed attorneys can give instruction to them.
• Some providers insist on postal or face to face applications for attorney cash.  This is usually also followed with ongoing management of the account by post or branch visits – this is generally because the providers online application system is not sophisticated enough to accept anything other than a standard single or joint application.

Latest Rates

Here are some examples of the most competitive rates available for attorney cash:

• No Notice – 1.01%
• 3 Months – 1.28%
• 1 Year Fixed – 1.65%
• 2 Year Fixed – 1.68%
• 3 Year Fixed – 2.08%

For more information on managing attorney cash, or to see how we can help, contact us on 0345 094 2255.