Are we obliged to bail out our adult daughter?

After decades of financially supporting our only daughter, my husband and I have decided it is time to “pull the plug”. She has remained obstinate about getting a job since being fired back in 2015. Following the pandemic, we realised we can no longer rely upon our limited savings. Constant requests for money have put a serious strain on our finances and relationship. Before we go ahead, does my daughter have any legal rights which commit us to provide financial support? She is still single. Would the situation be different if she had dependants? Would we be obliged to support our daughter if we separated?

John Darnton, consultant at law firm BDB Pitmans, says although ceasing financial support for an adult daughter may create family tensions, you should not be concerned about the possibility of a legal claim by your daughter while you and your husband are living together.

Your daughter may potentially have a claim against your estate upon your death, but the Court of Appeal has very recently handed down a decision which should give you and other parents comfort in a situation such as this.

Faiz Siddiqui was in his 40s and had been supported by his parents. They provided accommodation and paid utility bills for him. He sought further financial support from them on the basis that he was vulnerable and this was a “special circumstance” which enabled the court to direct the payment of maintenance to him either under matrimonial legislation or the Children Act.

His parents were, incidentally, happily married at the time of the application. The judge decided that in the circumstances there was no jurisdiction to make such orders and the Court of Appeal has now refused permission to appeal.

Mr Siddiqui argued that it was discriminatory that an adult child could potentially seek financial support from his or her parents if they were separated and either he was in full-time education or a special circumstance existed, but not if the parents were happily married.

The Court of Appeal disagreed. It stressed that the court’s ability to make the types of orders available to an adult child arose when the parents’ relationship had broken down. That was their purpose and objective. The aim of the legislation was to address the financial consequences of a breakdown in the parents’ relationship. It was not to create a freestanding right for adult children to seek financial support from their parents.

You ask whether the outcome would be different if there had been a breakdown in your marriage. Without knowing more it is hard to give a definitive answer, but it is unlikely that your daughter could bring a successful claim on divorce unless she was either in education (normally being up to the conclusion of a first undergraduate degree) or a “special circumstance” existed.

A special circumstance is not a closed category, but usually involves the child suffering from a mental or physical disability. The inability to hold down a job or the existence of grandchildren would not be enough.

Our mother’s investments are stuck in limbo

My elderly mother has Alzheimer’s disease. A few years ago, she created lasting powers of attorney (LPA) to manage her financial affairs should she take a turn for the worse, including the appointment of discretionary fund managers to manage her assets to pay for her care. She is now in a home and the fund management team have told us that they no longer have any mandate to act. That mandate, apparently, rests with my mother and she can no longer make those decisions and even though we are her guardians we cannot mandate the investment managers to act. What can we do?

Amish Patel, an associate at law firm Royds Withy King, says your mother’s attorneys have responsibility and authority for managing your mother’s finances under the LPA. The process for setting up an LPA differs slightly depending on whether you are in England and Wales, or Scotland.

Attorneys are unable to delegate functions unless authorised to do so in the LPA. Appointing or continuing with a fund manager on a discretionary management scheme is, in essence, a delegation of the attorneys’ functions. 

The Office of the Public Guardian (OPG), the government body responsible for overseeing the registration and use of LPAs, confirms that the donor — the person making the LPA — must include an instruction in their financial LPA if they want their attorneys to be able to:

The OPG provides standard wording in its guidance for adding such a clause into the LPA. This wording must be included in the LPA before it is signed. It cannot be added retrospectively.

Failing to include this clause means that the fund managers will be unable to accept the attorneys’ instructions to continue the fund on a discretionary management basis. 

The reasoning behind the fund manager’s decision is that they no longer have the correct authority to continue to manage the fund on a discretionary basis and, without specific instructions in the LPA, they cannot accept instructions from the attorneys. If the fund manager continued to act on a discretionary basis, they could be subject to compliance and regulatory consequences.

For the attorneys, continuing with such a scheme without the proper authority risks a claim for breach of fiduciary duty, usually by other family members or loved ones who may question whether the attorneys are acting in your mother’s best interests. 

If your mother continues to have sufficient capacity to make a new LPA with the clause inserted, this will be a cost effective and efficient route to resolving the impasse. However, it may be necessary to instruct a medical expert to assess her capacity given your mother’s Alzheimer’s. 

Should your mother lack capacity, the alternative is a costly and time-consuming application to the Court of Protection to seek an order allowing the continuation of investments on a discretionary management basis. 

We understand that the absence of this clause in many LPAs is causing widespread issues and the OPG has been lobbied by, among others, the Law Society to reconsider its stance.

The opinions in this column are intended for general information purposes only and should not be used as a substitute for professional advice. The Financial Times Ltd and the authors are not responsible for any direct or indirect result arising from any reliance placed on replies, including any loss, and exclude liability to the full extent.