Out of reach
What happens when a UK resident client who can no longer manage their financial affairs has assets in Guernsey, ponders Alison MacKrill
Mental incapacity can render it impossible for an individual to manage their own financial affairs. The Alzheimer's Society estimates that around 850,000 people in the UK are currently living with dementia of some form.
With improved health care and longer life expectancies, this figure looks set to rise to a million by 2025; the issue of diminished mental capacity in relation to financial affairs is therefore likely to see a corresponding increase.
An individual resident in England, Wales or Scotland should strongly consider making provision for someone to look after their property and affairs, prior to the point where they are no longer capable of doing so for themselves. They should also consider their position in relation to assets they hold in other jurisdictions.
The first thing to establish is whether a power of attorney would be given effect in Guernsey, once the donor of the power has become incapable of managing their own financial affairs.
If not, what steps would need to be taken in order for another person to manage the assets situated in the island?
England and Wales' Mental Capacity Act 2005 and Scotland's Adults with Incapacity (Scotland) Act 2000, contain provisions which enable an individual to give another person a power of attorney, which will continue to have effect should the donor lose mental capacity.
The Powers of Attorney and Affidavits (Bailiwick of Guernsey) Law, 1995, does not contain such provisions. Moreover the Hague Convention on the International Protection of Vulnerable Adults does not apply to Guernsey.
Nevertheless if a person who is not domiciled in Guernsey owns movable property in the island, the practice
of the Guernsey court is to order the local registration of such a power of attorney, even though the donor is no longer mentally capable to give such an instruction. This enables the attorney to act in relation to Guernsey based financial affairs and assets of the donor.
The proviso for this is that the donor has already given a lasting power of attorney in compliance with the law of England and Wales (registered by the Office of the Public Guardian in England), or a continuing or combined power of attorney in compliance with the law of Scotland (registered by
the Office of the Public Guardian
in Scotland) (a registered power) as
the case may be.
Similarly the Guernsey court will register an enduring power of attorney given under, and registered by, the Court of Protection in accordance with the Enduring Powers of Attorney Act 1985; the predecessor to the Mental Capacity Act 2005.
The registration process is generally quick, inexpensive and straightforward. Application is made by the attorney, supported by an affidavit regarding the capacity of the donor and with the payment of a court fee.
It is dealt with by the Ordinary Court and does not require the attendance of the attorney. In cases where the facts of the matter are particularly complex or novel, it can be referred to the Full Court of the Royal Court of Guernsey.
When an LPA does not exist
Where no registered power is held (as in the UK) it will be necessary for an application to be made for a curatelle, or guardianship, with the appointment of a curateur (guardian) to carry out any transactions in relation to the property owned by the incapable adult. The application is made to the Royal Court, supported by an affidavit relating to
the capacity of the incapable adult.
The curateur will be a Guernsey resident, so an advocate is frequently appointed.
The appointment of a Guernsey resident guardian is required even if a receiver or curator (as the case may be) has been appointed by the Court of Protection (in England and Wales) or the appropriate Sherriff Court (in Scotland), to manage the affairs of the incapable adult. The authority given under the guardianship order will only extend
to England and Wales or to Scotland
(as the case may be).
It is preferable for an individual who owns Guernsey assets to make a Guernsey will. A separate will enables an application for probate to proceed in Guernsey without delay. Obtaining a grant of representation in Guernsey is swift. If the estate has assets in a number of jurisdictions, being able to access assets in Guernsey while grants are obtained elsewhere is often advantageous.
As is the case in England, Wales and Scotland, the authority of a guardian expires on the death of the incapable adult.
Managing assets on death
There is no equivalent law in Guernsey relating to the making of a statutory will as applies in England and Wales. If an individual is intestate, or has a single will dealing with his worldwide assets, a grant is usually obtained from a District Probate Registry in England or the Sherriff Court in Scotland, before applying for a grant in Guernsey for the Guernsey assets.
A foreign grant of representation is not recognised. Where a grant of representation has been obtained in the UK (although it must be re-admitted to probate in Guernsey) no evidence as to foreign law is required. Where a grant has been obtained in another jurisdiction, the registrar of the Ecclesiastical Court may require evidence by affidavit,
to support the application in relation
to the law of the other jurisdiction.
Fees are payable in relation only to the Guernsey estate unless the will, which deals with the worldwide assets of the deceased, is admitted to probate in Guernsey, prior to being used elsewhere. In this case, the fees would be based on the value of the worldwide assets of the deceased passing under the grant. Fees are 0.35 per cent of the value of the assets passing under the grant.
There is no inheritance, capital gains or wealth tax in Guernsey.
The title to Guernsey assets comprising real property, whether passing under a will or on intestacy, passes automatically to the heirs of the deceased under the doctrine known as le mort saisit le vif. Guernsey rules for immovables apply to immovables situated in Guernsey irrespective of where the owner resides, or is domiciled. Freedom of disposition applies in relation to all Guernsey property.
An attorney administrator is frequently appointed to administer the Guernsey estate if the personal representative (PR) is overseas. If there is no will, the PR must post a bond as security for twice the value of the estate. This is not required where the PR appoints an advocate of the Royal Court as their attorney.
Office copies of the grant are supplied for a small fee, which provides evidence of the PR's right to deal with the estate.
If the PR or his attorney places an advertisement in a Guernsey newspaper in two successive weeks, requesting claims against the estate and giving details of the intended distribution of the estate, he or she can distribute the movable estate after three months,
free of any claims against the PR other than those of which he has notice.
Therefore dealing with Guernsey situs assets owned by a non-Guernsey domiciled UK resident individual is relatively straightforward. The court in Guernsey will order the local registration of a registered power without the attendance of the attorney in court.
Where there is a separate will of Guernsey movable property, obtaining a Guernsey grant of probate is generally a straightforward process, and likewise does not require the attendance of the PR before the Ecclesiastical Court.
It should be noted that Guernsey's parliament, the States of Deliberation,
has directed the Policy Council (the States' body responsible for developing strategic and corporate policy and coordinating its business) to investigate the introduction of lasting powers of attorney. Such legislation is unlikely
to be implemented before 2016.
Alison MacKrill is a senior associate at Carey Olsen